Europe PVC September contracts firm on costs, solid demand

27 September 2013 23:59  [Source: ICIS news]

LONDON (ICIS)--European September polyvinyl chloride (PVC) contract prices have moved up by the formula pass through level and slightly above on the back of higher upstream costs, reasonably good demand and sufficient but not plentiful supply, market sources said on Friday.

September PVC contract settlements which were agreed earlier in the month were at plus-€35/tonne ($47/tonne) in some cases and even up to plus-€40/tonne in a few cases. However, as the month progressed, increases of €25-30/tonne became more frequent.

This is because buyers leveraged to some extent the expectation that the ethylene contract price would come down in October, which has materialised since then. In addition, a few sellers had also only offered the formula pass through level increase, which also provided buyers with some flexibility to negotiate down the price increase targets of other sellers.

The ethylene formula pass through level for PVC equates to around 50% of the ethylene contract movement.

In the UK, price increases were mainly around £20/tonne, taking into account the ethylene cost ratio, but also the euro/pound sterling exchange rate effect.

European polyvinyl chloride (PVC) contract prices in September were assessed at €980-1,020/tonne FD (free delivered) in northwest Europe, €915-1,005/tonne in the Mediterranean and £865-895/tonne in the UK, according to ICIS.

Lower increases of €20/tonne were quoted by one buyer in southern Europe, but there was no other market confirmation to substantiate this. By contrast, there were price hikes in excess of £20/tonne in the UK, but these were not widely confirmed.

Numbers below the ranges were also noted in a few cases, but they were not seen to reflect the general market level.

PVC consumption is reasonably solid and in line with general expectations for the time of year. A few  players suggested that while demand had started well in the first weeks of September, there was some talk that this had tailed off to some extent near the end of the month.

This was attributed to some buyers, delaying purchases until October in view of the upstream cost relief and the possibility that they could benefit from this.

PVC demand and supply is fairly well aligned. A few players suggested that the market was still on tight side, following the residual effects from the spate of output constraints over the last few months.

By contrast, other sources suggested that availability had improved when compared with the last few months, as the maintenance turnarounds were now over.

Looking to October, players are just digesting news of the ethylene decrease, which was settled earlier on Friday.

Some sellers' initial ideas were to roll over the price into October to recoup lost margins and based on the expectation that demand is still likely to be reasonably good in October.

Buying sources, however, were keen to push for price reductions, citing the cost relief and the likelihood that demand is likely to seasonally slow in the fourth quarter as reasons for this.

($1 = €0.74)

By: Heidi Finch
+44 20 8652 3214

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