05 September 2013 19:39 [Source: ICIS news]
HOUSTON (ICIS)--Recent momentum in US polyvinyl chloride (PVC) export markets has changed following the sharp depreciation of the Indian rupee against the US dollar, sources confirmed on Thursday.
The Indian rupee has fallen by more than 20% against the US dollar this year, as investor confidence in the Indian economy ebbed in recent months.
Despite government measures to stabilise the currency, including curbing gold imports and cutting the state’s oil import bill, the rupee slumped to an all-time low of rupee (Rs)68.65 to the US dollar on 28 August. It has recovered slightly to reach Rs66.19.
The weakening was on the back of higher oil prices and the prospect that the US Federal Reserve will soon cut its bond-buying programme.
“Even though India is not the major destination for US PVC, the currency issue is a major import demand destruction factor for those countries,” a supplier said.
PVC exports from the US to Asia are down, not only because it is off season in the region, but also because of the high costs and uncertainty over the currency.
PVC buyers in India are rejecting imports to ease the impact of the sliding Indian currency, a trader said.
“The currency issues in India are impacting all imports including other industrial raw materials as well as energy feedstock, not just PVC resins,” a supplier said. “The total imports of products will be affected as nearly all of the trades are US dollars based, except for countries like Iran.”
Indian demand growth for PVC was a very healthy 15-17%, in line with the double-digit increases seen over the last 10-15 years, an Indian buyer said.
However, since July, growth has slipped to 5-7%, the buyer added.
“We are seeing that in general the so called emerging economies have slowed down from what was expected before, and also the currency situation has made it more difficult to do business,” a US trader said.
Many Indian traders have retreated to the sidelines for now. Higher offers have not been accepted by the buy side and minimal buying is taking place.
“The effect of the currency issue on PVC is equally pressuring PVC suppliers in Asia countries as well as in the US,” a supplier said. “However, the US resins are subject to a $45/tonne antidumping duty. Because of this barrier, Asian resins have advantages in India over US resins.”
Meanwhile, PVC demand remains low all around, with weak construction activity in Europe, slower business in Asia and reduced demand in the US.
US market participants had expected 2013 to be stronger, but have been disappointed with the muted pick up in homebuilding.
US PVC spot export prices are gauged at $950-965/tonne (€722-733/tonne) FOB (free on board) USG (US Gulf), stable from last week amid moderate demand.
($1 = €0.76)
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