Price and market trends: India PVC duties change global dynamics

21 April 2014 00:00 Source:ICIS Chemical Business

The Indian government’s revised schedule of anti-dumping duties (ADDs) for suspension-grade polyvinyl chloride (PVC) will likely result in additional inexpensive Chinese material looking for a home in nearby export markets such as Turkey and Egypt, creating additional pricing competition for material from the US and Latin America, market participants said.

The Indian government on 8 April imposed stiff penalties on most US, Mexican and Chinese material while giving more favourable treatment to shipments from particular producers in Taiwan and South Korea.

“This changes everything,” a major US producer said. The producer noted that India is not a large market for US PVC exports and so most effects to US producers will be tangential and occur in other markets.

PVC Prices

The revisions were expected on 4 March when existing ADDs were up for review.

But that was delayed by a month, and producers declined to sell into the market not knowing what duties may or may 
not apply.

That sent Asian PVC prices plummeting as exporters to India looked to sell product bound for that market 
elsewhere while the rules were being revised.

Those price drops echoed globally, sending export prices down in the US, Europe and Latin America after Formosa lowered its Asian benchmark price by $40/tonne and buyers bid even lower.

ASIA PRICE DECLINES

Prices in Asia have declined by an average $53/tonne, down to $1,017/tonne CFR (cost and freight) southeast Asia on 4 April from $1,070/tonne CFR southeast Asia on 21 February.

US prices moved down to an average of about $1,000/tonne FOB (free on board) USG (US Gulf) in the past two weeks from about $1,040/tonne FOB USG.

But the downward drift should end soon with the decision by the Indian Department of Commerce, which was dated 4 April but distributed on 
8 April.

New competition will likely emerge in the Mediterranean market, where US and Chinese product may go head to head to gain new market share, market participants said.

The ADDs renew and revise ADDs that were first imposed more than a year ago.

The duties were imposed against imports of PVC suspension grade originating in or exported from Taiwan, China, Indonesia, Japan, South Korea, Malaysia, Thailand, the US, the EU and Mexico.

ANTI-DUMPING DUTIES

Chinese product is subject to duties of from $91.27-147.90/tonne, according to tables provided by the Indian government.

“This new duty structure is likely to close the arbitrage for Chinese PVC imports into India, considering the high ADDs imposed on these,” according to an Indian PVC converter.

Chinese-origin carbide-based PVC cargoes often make their way into the Indian market at low prices, in times of high ethylene-based PVC prices from northeast Asia. However, with the new ADD structure enforced, Chinese producers are likely to find it difficult to sell to India at competitive prices.

Taiwanese major Formosa’s PVC exports from its home country and the EU are exempt from ADD payments, while all other Taiwanese PVC lots originating in Taiwan or any other country are subject to ADDs in the range of $9.47-61.25/tonne.

PVC imports from South Korean producers LG Chem and Hanwha are exempt from ADD payments.

Most US exports to India will be charged duties of $115.54/tonne. But US producer Westlake Chemical’s exports to India are subject to ADDs of $29.99/tonne, while Formosa’s exports from the US by Tricon Dry Chemicals will be charged ADDs at $31.22/tonne. Other major US producers include Axiall, OxyChem and Shintech.

Mexican PVC major Mexichem’s exports to India will be subject to ADDs of $88.10/tonne, while all other Mexican cargoes originating in and/or exported out of Mexico would be subject to ADDs of $163.05/tonne.

Most US producers contacted said they did not respond to the Indian government’s request for shipping costs and other business details, considering them proprietary. They were therefore treated more harshly.

ADDs levied on INEOS Vinyls Deutschland GmbH Germany, INEOS Sverige AB Sweden, INEOS ChlorVinyls Ltd, UK and INEOS ChlorVinyls Belgium NV are at $39.65/tonne, while all other cargoes produced in the European Union (EU) and exported out of the EU or elsewhere are subject to ADDs of $189.99/tonne.

According to market sources, this new structure of ADDs proposed is additionally expected to impact nearby markets such as the Middle East.

“With cargoes from key northeast Asian producers exempt from ADDs in India, the Middle East could be pushed to look for supply from the US, as the northeast Asian producers would prefer to sell to India at higher prices,” a trader in the Middle East said.

The Middle East markets enjoyed sourcing northeast Asian cargoes at competitive prices, amid the uncertainty in the Indian PVC market in the last couple of months following the impending announcement on the new ADD structure.

COMPETITIVE PRICES

Indian importers were hesitant to book cargoes without a clear idea on the ADDs, and 
the delay in the official announcement led buyers to defer purchases.

This saw some major northeast Asian producers move cargoes to the Middle East at competitive prices.

However, with India announcing zero ADDs on these northeast Asian cargoes, producers would be eager to sell to India at better prices.

Total PVC demand in India stood at 2.25m tonnes in 2013. Of this 1.25m tonnes are locally produced, while the rest is 
imported.

By Bill Bowen and Veena Pathare