Europe October PVC contracts move lower on cost relief

25 October 2013 23:59  [Source: ICIS news]

LONDON (ICIS)--The majority of European polyvinyl chloride (PVC) contract prices have been pressured lower in October, largely because of relief in this month’s upstream ethylene costs, said market players on Friday. 

Price decreases of €15-20/tonne ($21-28/tonne) in Europe and £15/tonne in the UK were largely mentioned by both buying and selling sources. This translates to €965-1,000/tonne FD (free delivered) NWE (northwest Europe) and €900-985/tonne FD Med (Mediterranean) and £850-880/tonne FD UK, according to ICIS.

Lower price reductions of €5-10/tonne in Europe and £10-12/tonne in the UK were heard from some players, especially sellers, but this was not seen to reflect the general market trend.

Larger price drops of €25-30/tonne were also heard from a few sources in central and southern Europe, attributed to strong competition among certain sellers and less robust demand than in northwest Europe.

One producer said it had secured some initial rollovers, but this was not confirmed by other market players. Some sellers had tried to keep prices stable in October, despite the feedstock relief, citing the need to improve margins and reasonably good market conditions. 

Buyers, however, said they resisted any price rollovers in October, stating that they required compensation for the feedstock relief. This was particularly in view of price increases over the last few months, which were more than the feedstock pass through level in some cases. The cost ratio for PVC is equivalent to around 50% of the ethylene price movement. 

In October, this equates to a price drop of around €17.5/tonne, following the €35/tonne reduction in the European ethylene contract price.

Demand continues to hold up reasonably well in northwest Europe in October, with little-to-no evidence of any seasonal slowdown. The main downstream building sector normally enters into low winter season during the fourth quarter, but this was not yet visible amid relatively mild weather in Europe.

A few players suggested that there was some signs of a slowdown in Europe, particularly in the Mediterranean and central Europe, as some buyers held back from purchasing in the second half of October amid expectation of lower feedstock values and the possibility of lower PVC prices in November.

There was also some talk of players keeping a close eye on their purchases amid stricter inventory control at year-end, but this was not yet seen to be a significant factor in October.

The market is largely balanced, albeit with a few exceptions. One or two producers said they have low stocks because of upstream vinyl chloride monomer (VCM) constraints and/or good demand.

Despite this, buyers had sufficient supply for the most part. A few customers said they had some supply disruption from one seller for certain grades, but this was not seen to be for pipe grade. However, the latter was not confirmed at source.

($1 = €0.72)

By: Heidi Finch
+44 20 8652 3214

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