Price and market trends: Weak demand to cap Asia PVC gains

27 September 2013 10:19  [Source: ICB]

Demand for polyvinyl chloride (PVC) in the key markets of India and China has remained weak and could limit near-term gains in prices, which are being held up by high energy costs, market sources said on 16 September.

With not much buying interest, PVC producers’ attempt to raise offers for October shipments may be thwarted, they said.

On 13 September, spot PVC prices in China were assessed at $1,010-1,030/tonne (€758-773/tonne) CFR (cost and freight) China, stable from the previous week amid subdued trading activity and limited fresh discussions, according to ICIS.

PVC pipes REx Features

Rex Features

In India, spot prices gained $10/tonne over the same period to $1,050-1,070/tonne CFR India, aided by a stronger rupee in the foreign exchange market.

The stronger Indian rupee increased the domestic producers’ import parity prices to $1,070-1,080/tonne CFR India from $1,040-1,050/tonne CFR India, previously, market sources said.

On 18 September, the Indian rupee (Rs) was trading at around Rs63 to the US dollar, recovering from near-Rs69 levels recorded in late August.

US crude was trading at above $107/bbl, while Brent crude was quoted at around $111/bbl.

In China, deep-sea cargoes flowing into the country generated muted buying interest, despite lower prices compared with those of Asian origin, market sources said.

US lots for loading in early October were offered at $1,000/tonne CFR China, well below the $1,030-1,050/tonne CFR China offers for September shipments originating in Asia, but Chinese importers were not enticed to buy, they said.

Weak demand in downstream markets and limited buying interest ahead of the upcoming mid-autumn festival holidays on September 19 has significantly affected import discussions.

“The Chinese domestic PVC market is very weak at the moment, and we have received very subdued response to US cargo offers,” said a key seller of US cargoes to China.

This weak demand is expected to be a primary consideration when key Asian producers announce their October offers this week, market sources said.

China is major importer of PVC, with actual imports of the polymer last year totalling 13m tonnes, according to industry sources.

SEVERE COST PRESSURES

PVC producers in Asia argue that severe cost pressures following recent steep gains in crude and feedstock prices, as well as tightening availability of spot material, justify higher prices of their products.

“Our margins are under pressure, because of high crude prices. So we have no choice but to increase our offer prices, despite weak demand or resistance from buyers,” a northeast Asian producer said.

In India, the depreciation of the rupee by more than 16% against the US dollar since April 2013, has significantly dented its import appetite.

Asia PVC

The rupee hit a record low of nearly Rs69 to the US dollar in late August, regional traders and converters suspended all imports to monitor the movement of the currency in the foreign exchange market, before appreciating in recent weeks. A sharp depreciation of a currency makes imports more expensive.

For the fiscal year ending March 2013, India’s total PVC consumption stood at around 2.25m tonnes, 44% of which were imported.

Seasonal weakness in demand for pipes in India during the monsoon months of July-September has also been weighing on the country’s PVC market over the past months, market sources said.

MORE DEMAND SOON

While most industry participants in India are optimistic of a revival in PVC demand in late September, signs of a recovery are yet to be seen, and a number of Indian traders have adopted a cautious approach amid continued unpredictability in the Indian rupee.

“Pipe sales are expected to pick up by end September, so it will take some time for the market to absorb the present resin inventories, a major PVC pipe producer in southeast Asia said.

“We should see good buying interest for resin by mid-October, as a cutback in purchasing in the last two months had led to limited arrivals in September,” he said.

Meanwhile, higher prices of ethylene-based PVC are also likely to boost sales of the lower-priced carbide-based PVC variety in India.

“With the Chinese PVC markets not doing well, Indian importers can source carbide-[based] PVC from China at much lower prices, hampering buying interest for ethylene-based lots,” and Indian carbide-based PVC importer said.

Carbide-based PVC is usually priced lower by around $20-30/tonne compared with ethylene-based PVC, market participants said.


Author: Veena Pathare and Jasmine Khoo



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