Price and market trends: Tight supply to drive up Asia PVC, VCM prices

25 January 2013 10:45  [Source: ICB]

Numerous plant shutdowns are likely to lead to rising prices even as demand remains lacklustre

Spot prices of polyvinyl chloride (PVC) and feedstock vinyl chloride monomer (VCM) in Asia are poised to continue rising in the near term on tight regional supply following the shutdown of major facilities in Malaysia, ­industry sources said.

On 11 January, VCM was assessed at $830-860/tonne (€623-645/tonne) CFR (cost and freight) NE (northeast) Asia, up by $10-30/tonne from the previous week, while PVC spot prices were at $980-1,000/tonne CFR CMP (China Main Port), up by $10/tonne at the low end of the range over the same period.

PETRONAS Chemicals Group (PCG) has proceeded with its plan to decommission its three vinyls plants at Kertih, Terengganu, in Malaysia, at the start of 2013, resulting in a capacity loss of 400,000 tonnes/year for PVC and 150,000 tonnes/year for VCM, market players said.

The units are operated by the company's wholly owned subsidiary Vinyl Chloride (Malaysia).

PCG, which is a key regional exporter of PVC and VCM, and deems the operations no longer fit to its overall business strategy of boosting output of high-margin products. The company is also divesting its interest in Phu My Plastics and Chemical that operates a 100,000 tonne/year PVC plant in Ba Ria Vung Tau province in Vietnam.

A "slight panic" is gripping the VCM and PVC markets as most players are worried about securing cargoes if prices were to rise significantly, said a source at another southeast Asian vinyls producer.

The tight supply condition is not confined to southeast Asia. Northeast Asia is also suffering from limited availability of vinyls products as Tosoh Corp's 550,000 tonne/year VCM line in Japan has remained shut, more than a year since an explosion occurred at the facility. No restart date was set for the plant.

Spot PVC and VCM prices are expected to remain on an uptrend even though demand in the ­region has remained fairly stable, and even lacklustre in the key China market, industry sources said.

Taiwanese major Formosa Plastics Corp (FPCC) has offered February-loading lots of PVC at $1,020/tonne CFR CMP this week, up by $40/tonne from its January offer, said a comp- any source.

Discounts for bulk purchases of over 1,000 tonnes are unlikely as "supply of spot cargoes is already critically tight", the source said.

The Taiwanese producer has yet to decide on PVC sales ­volume allocation for China, India and southeast Asia, preferring to wait for market players' response to higher prices, the source said.

A VCM producer in northeast Asia is adopting the same strategy, with a company source saying it is better "to observe the buying ideas first before going into serious discussions, as spot cargoes are limited".

"Prices of VCM and PVC are lending support to each other amid the tight supply situation. Strong feedstock VCM prices pull PVC prices up and vice versa," said an industry source.

VCM is the feedstock in the production of PVC, which is used extensively in piping and other products for homebuilding.

Additional reporting by Becky Peng and Veena Pathare

By: Jasmine Khoo
+65 6780 4359

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