07 January 2014 02:08 [Source: ICIS news]
By Veena Pathare
SINGAPORE (ICIS)--Spot polyvinyl chloride (PVC) prices in India and Pakistan are likely to be buoyed by firm feedstock costs in the first half of the year, market sources said.
On 3 January, PVC was assessed at $1,030-1,050/tonne (€752-767/tonne) CFR (cost and freight) India/Pakistan, stable from December prices, according to ICIS data.
Prices of feedstock ethylene are expected to remain high in January to June because of tight supply, market sources said.
Ethylene prices were assessed at $1,500-1,540/tonne CFR NE (northeast Asia) on 6 January, ICIS data showed.
In India, PVC prices have been stable-to-firm since mid-November largely on firm ethylene prices, which beat the downward pull from weak demand. In July to October last year, PVC prices had been soft, partly on extended monsoon season.
About 70% of India’s total PVC demand of 2.5m tonnes/year is consumed by the agricultural sector, where the resin is widely used in pipes for underground irrigation systems.
The infrastructure sector accounts for the remaining 30% of the country’s PVC demand.
While PVC demand in India is expected to strengthen in the second half of January and is likely to remain firm for the whole of the first quarter, overall spending on infrastructure and construction sectors may be suspended in the months leading up to the national elections, which begin in May.
“Demand should improve by mid-January following the Makar Sankranti or the Harvest festival, as it marks the beginning of the Rabi crop season. Demand should remain strong till around March, but when elections begin, nothing is likely to move in any of the downstream markets,” a source at a regional producer said.
India’s PVC demand, which grew 14% in the fiscal year ending March 2013, is forecast to slow down to 10-11% in 2013-14, with growth expected to decelerate further to 6-8% in the following year amid a continued uncertainty in the economic outlook.
A severe credit crunch in regional markets, insufficient government funds for water supply and distribution projects and cutbacks in infrastructure and construction spending as the country goes to polls, are all expected to cap PVC demand growth this year.
However, market participants are hopeful of a demand recovery later in the year that would come with political stability and implementation of favourable economic policies.
“We hope that a new stable government that is pro-growth comes into power, because this will then infuse optimism into the currently Indian disillusioned market,” an Indian trader said.
In neighbouring Pakistan, a slowdown in the downstream construction sector is expected to restrain PVC demand growth, because of insufficient government funds allocated for several projects.
PVC buying is expected to be led by small-volume purchases, with regional converters likely to resist bulk buying, as well as high prices, according to market participants.
PVC demand in Pakistan, estimated at 140,000-150,000 tonnes/year is dominated by usage in pipes. These pipes find wide use in agriculture and construction sectors.
($1 = €0.73)
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