FocusAsia PVC may decline on weak demand across markets

22 July 2013 09:48  [Source: ICIS news]

By Veena Pathare and Jasmine Khoo

PVC goes into plastic pipes used in constructionSINGAPORE (ICIS)--Spot polyvinyl chloride (PVC) prices in Asia are likely to decline in the coming weeks on soft demand across all markets, with buying sentiment in the southeastern part of the region seasonally weak because of Ramadan, industry sources said on Monday.

Ramadan is a month-long Muslim fasting month that started in mid-July.

On 19 July, PVC prices were assessed at $1,020-1,040/tonne (€775-790/tonne) CFR (cost and freight) China Main Port (CMP), according to ICIS data.

Key Asian producer Formosa Plastics Corp (FPC) of Taiwan hiked its offers for August PVC by $20/tonne on 17 July to $1,050/tonne CFR (cost and freight) China and to $1,070/tonne CFR India, citing higher energy and feedstock costs, market sources said.

But a weak market response to higher prices prompted the company to lower offers by $30/tonne two days later. FPC announced late on 19 July that August PVC offers will be $1,020/tonne CFR China and $1,050/tonne CFR India.

In the key Chinese market, trading activities remained subdued amid a slowing economy, with its housing sector cooling down. Domestic availability of alternative carbide-based PVC is also weighing down on interest for ethylene-based PVC imports.

Another northeast Asian producer offered its August-loading parcels to Chinese buyers at $1,040/tonne CFR China last week, but failed to receive any bids, a company source said.

All eyes will be on the market’s response to FPC’s revised prices over the next two trading days, market sources said.

If the FPC’s PVC offer were to remain at $1,050/tonne CFR China, “it will be a struggle for Chinese customers” to import the material, a source from a separate northeast Asia-based producer said.

In India, FPC’s revised offers of $1,040/tonne still received limited interest from importers, market sources said.

“No trader is going to take position [even] at this price – not when pipe demand is so weak, and most want to wait and watch [how] the situation [unfolds],” a regional trader said.

Demand for most polymers in India typically weakens between June and September, during the monsoon season, which is particularly heavy this year, market sources said.

Importers have been holding back purchases given weakness in domestic sales, they said.

Laguid demand can also be observed in southeast Asia, in which most countries observe the the month-long Ramadan.

An offer made at $1,050/tonne CFR SE Asia last week failed to yield bids, said a source from a southeast Asian producer, adding that the “market was very quiet”.

“Prices for August are likely to roll over from July,” said another producer, citing that bids received were at $1,020/tonne CFR SE Asia.

Most producers are on a wait-and-see mode and are not in a hurry to reduce prices.

“What is important is the demand situation, and it is very difficult to assess it now because of the ongoing Ramadan. Ramadan is a very big influence,” a third southeast Asian producer said.

($1 = €0.76)

Additional reporting by Stephanie Zhang

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Veena Pathare & Jasmine Khoo
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