28 November 2012 03:06 [Source: ICIS news]
By Veena Pathare
SINGAPORE (ICIS)--Polyvinyl chloride (PVC) resins prices in India may increase in December, backed by better demand for end-product irrigation pipes amid the ongoing sugarcane harvest season, industry sources said on Wednesday.
“There is a definite partial improvement in the PVC pipes market with the beginning of the [sugarcane] harvest season and farmers have begun considering investments on the field,” a regional PVC pipe producer said.
In the week ended 23 November, PVC prices in India were assessed at $930-970/tonne (€716-747/tonne) CFR (cost and freight) India, up by $10/tonne at the low end of the range from the previous week, according to ICIS.
About 70% of the total PVC demand in the south Asian country is consumed by the agricultural sector, where the resin is widely used in pipes for subterranean irrigation systems. The infrastructure sector accounts for the remaining 30%.
PVC resin demand has been sluggish since September, when the monsoon season ended. The usual pre-festive peak purchases of pipes for agricultural applications ahead of the Diwali festival in mid-November did not happen and demand remained lacklustre.
“This trend is likely to change early next month, as November sales for PVC irrigation pipes have been encouraging. This is anticipated to push manufacturers to consider PVC resin purchases in the following weeks,” the PVC producer said.
There is usually a lag of 8-10 days before a change in demand in the pipes segment brings about a movement in the PVC resins market, according to pipe makers.
Resin prices in the region are likely to see a consequent uptrend December onwards, buoyed by the expected upswing in demand.
Last week, US PVC offers to India rose by $45/tonne to $960/tonne CFR India, as the US-based makers announced price hikes for mid-December to early January shipments.
According to ICIS data, the rise in prices were a result of a relatively limited supply of product from the US early next year as well as the possibility of a rise in US domestic demand for reconstruction following Hurricane Sandy.
Asian offers, too, were heard to hold strong at $970/tonne CFR India for December shipments despite weaker buying ideas, according to ICIS data.
Of the total Indian PVC demand of 2m tonnes per year, 1.2m tonnes or 60% is produced locally, while imports from northeast Asia and the US make up the rest.
The infrastructure sector, too, is projected to push PVC demand for construction projects January onwards.
“The infrastructure segment is expected to boost [PVC] resin demand in January when purchasing activity for a number of government projects commences ahead of the Union budget held annually in February,” said an industry source.
“Although growth in the infrastructure segment has slowed because of an uncertain economic outlook, government spending on agriculture continues to be strong, driving PVC growth,” the source added.
Between April and September this year, India’s PVC resins industry netted a growth in consumption of 10-11%, with the PVC pipes segment registering a 15% increase over the same period, according to market sources.
($1 = €0.77)
Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
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