Price and market trends: Europe PVC sellers seek gains

17 March 2014 00:00 Source:ICIS Chemical Business

European polyvinyl chloride (PVC) sellers are looking for minimum price rollovers to increases in March, despite the reduction in the upstream ethylene contract price, but buyers want at least some feedstock cost relief to be passed along, market players said on 3 March.

It was still very early in the month to have precise price indications for March, particularly as a number of PVC contracts are not finalised until the third or fourth week in the month.

EU PVC

Sellers said there is an urgent need to restore profitability in the chlorvinyls value chain as soon as possible, following the price erosion seen for caustic soda over recent months and the need to compensate with vinyls.

One producer said that it will retain a strict price policy for March in order to recover lost electrochemical unit (ECU) margins and no concessions will be made in respect to the feedstock price reduction. Instead, it said that price increases would be sought, although it did not define any precise targets.

Another manufacturer had previously announced targets of plus €50/tonne in January. While it had achieved some price rises in January, its prices rolled over in February and thus the producer is looking to recoup the remainder of the increase in March.

Selling sources said that demand has been good in the first two months of the year and forecasts for March demand are looking encouraging and in some cases better than the previous two months. Sellers said that is also likely to support some margin recovery.

BUYERS EXPECT FALLS

Some buying sources, however, said that they expected to see prices around the cost ratio price reduction for PVC in March.

For PVC, the cost ratio is equivalent to around 50% of the ethylene monthly contract price move, which would translate into a decrease of €10/tonne in Europe or £10/tonne in the UK/Ireland, depending on exchange rate.

One customer said that it had been offered some price rollovers for March, but it had already concluded some PVC business for March at minus €10/tonne.

It suggested that some players were settling their business early in the month in order to secure volumes.

Some customers said that they want to see relief in upstream ethylene costs passed on into the PVC market, particularly as ethylene costs have come down over the last two months and PVC sellers had already retained some margin with the February PVC settlements.

These buyers said that they also expected PVC prices to soften not only on costs but also amid plentiful supply.

European PVC capacity is not being fully utilised, and they expect an influx of competitive imports from the US and South America.

Other buyers, however, were not as bearish. One customer considered price stability or a slight decrease for PVC to be most realistic, as ethylene cost relief was being weighed against sellers’ strict margin recovery needs and the approaching high season in the downstream construction industry.

Demand in the downstream construction sector was better than expected in January and February in northwest Europe thanks to mild winter conditions and some glimmers of economic recovery.

CONSTRUCTION SEASON

The general expectation is that consumption is likely to be good in March as it moves closer to high season in the construction industry and because it is a longer working month when compared to February. Players also note that Easter will take place in April rather than March this year, which is also likely to buoy demand in March to some extent.

By Heidi Finch