LONDON (ICIS)--Most European polyvinyl chloride (PVC) producers are looking for at least rollovers in April, despite softening in upstream ethylene costs, while buyers are pushing to see some compensation for the cost relief, said market players on Monday.
“We need more money - [we have] not achieved this in the last few months - [we are] singing the same song,” said one main manufacturer, who added that retaining the ethylene cost reduction is not sufficient to compensate for poor profitability in the chlorvinyls chain.
A few producers have recently announced plans to raise PVC prices in April in order to address the continued margin pressure in the chlorvinyls industry. This is in view of the need to try and compensate for the recent price erosion in the caustic soda market.
Vestolit recently announced its target of plus €30/tonne for April, while KEM ONE said it would maintain a strict pricing policy in April and no feedstock related price concessions will be made. It added it would look for price increases, although precise targets were not disclosed.
Some producers, however, acknowledged that increases are proving difficult to implement in April and price rollovers are more likely. One of the sellers said this is because of insufficient seller discipline to push for increases and availability being generally good.
Another seller said it had tried to pass on increases but it had not been possible, adding the lack of firm producer stance had continued softening in the upstream ethylene contract price over the last few months and some reduction in demand in April due to the Easter holidays.
A few sellers conceded that reductions of €5/tonne are also being discussed in some cases, along with rollovers.
By contrast, one producer said it remains firm on price increases and it has passed on plus €10/tonne in its first April settlements, although it has not been disclosed which grade PVC this is for.
Customers are generally pushing for price decreases in April - around the cost ratio amount and slightly more in some cases. For PVC, the cost ratio is equivalent to around 50% of the monthly ethylene contract price movement, which would translate into a reduction of €7.50/tonne in April.
Some buyers are pushing for slightly more than the cost ratio reduction, stating they had not seen the full cost ratio relief past on downstream over the last few months. Some customers said they had already booked some April business at minus €5-10/tonne in northwest Europe and the Mediterranean for PVC pipe and cable grade applications and minus £5/tonne in the UK for pipe grade.
One buyer said it had secured reductions of €7-10/tonne for April because of ample supply and decreasing demand ahead of the Easter holidays. Another customer in the region said it had agreed rollover to slight reductions for April PVC business.
It said sellers had started discussions asking for price increases but was unsuccessful because of the weakness in demand, reduction in the upstream ethylene contract price and some price decreases for imports from the Americas.
A second customer in mainland Europe said it is still in discussions for April, but expects that price stability is most likely, as sellers’ price increase attempts are being weighed against the reduction in ethylene feedstock costs and fairly flat demand.
It added that while weather conditions are favourable in Europe for downstream construction activity, it said that some political uncertainty and economic constraints in parts of Europe were being a limiting factor. Despite this, it did not rule out minor price increases in a few cases, depending on region and producer stance.
Another buyer, albeit in the UK/Ireland was more bearish, noting that it had been offered at minus £5/tonne, but would push for minus £10/tonne. It said this was because it had not yet seen the full benefit of the cost ratio reduction for ethylene over the last few months.
Availability remains good, despite some plant maintenances.
Consumption in the downstream construction industry in April is expected to be slightly lower than in March because of downstream plant reductions and closures over the Easter holiday period. However, sellers maintain that demand is still reasonably good in April, despite the Easter holidays.
One producer said that PVC demand for March and April should be seen in combination, because of the variation in timing when Easter falls. It said that demand for March and April combined is better this year, when compared to the same period a year ago, amid mild weather conditions.
It added that there were also some signs of economic improvement in certain countries, but it noted that it was a slow recovery.
European PVC contract price settled largely at a rollover in March, although slight reductions in were also reported in a few cases. Prices were assessed steady at €970-990/tonne FD (free delivered) NWE (northwest Europe), €900-970/tonne FD Mediterranean and £845-870/tonne FD UK, according to ICIS.