India PVC demand softens on monsoon, August offers resisted

Focus story by Veena Pathare

SINGAPORE (ICIS)–Spot polyvinyl chloride (PVC) demand in India has started showing signs of softening with the onset of monsoon in several parts of the country, and higher offers for August shipments were firmly resisted by local buyers, market sources said on Tuesday.

PVC prices in India were assessed at wider $1,110-1,140/tonne CFR (cost & freight) India in the week of 21 July from $1,120-1,130/tonne CFR India seen in the previous week, according to ICIS data.

Prices widened on the gap between buying and selling ideas amid higher offers and weaker buying interest, ICIS data showed.

Demand in the country began to soften during the week, as heavy rains lashed several parts of India during the week, and led to expectations of a slowdown in sales of PVC pipes in the following weeks, market sources said.

Pipe as well as resin demand typically remains seasonally slow in this period, before strengthening from October onwards when monsoon ends.

This slowdown is attributed to a feeble requirement in irrigation pipes for agriculture, in the presence of a normal monsoon.

The onset of rains affected discussions for August shipments, and higher offers were resisted by Indian importers who opted to wait for a reduction in prices in the following weeks.

Northeast Asian cargoes loading in August and exempt from anti-dumping duties (ADDs) in the south Asian country were offered in the week beginning 14 July at $1,140-1,150/tonne CFR India, up by $10-30/tonne from July prices.

However, these found limited takers among importers, who opted to defer purchases.

Furthermore, heavy rainfall recorded in many parts of the country towards the end of that week led to a dip in price ideas for these August shipments.

“Early last week, buyers were willing to look at a price of $1,110-1,120/tonne CFR India. But this price is not workable today, and buyers want prices below $1,100/tonne CFR India,” an India-based trader said.

However, PVC producers deemed lower prices unworkable, amid the presently firm upstream ethylene prices that continue to hover well over $1,500/tonne CFR NE (northeast) Asia, and weigh on feedstock vinyl chloride monomer (VCM) prices.

An upcoming turnaround at a key producer VCM and PVC facility in northeast Asia also weighed on PVC and VCM availability and prices.

“Even if you assume an ethylene cost of $1,500/tonne CFR NE Asia today, account for 70% of this in arriving at the cost of PVC, add to that $150/tonne production cost and the freight cost, the current selling price is nowhere close to the cost incurred by the producer,” a source at a key northeast Asian producer facility said.

Domestic producers in India also continue to maintain higher list prices for July, amid firm ethylene costs.

List prices for July shipments continue to remain firm from 1 July at Indian rupees (Rs) 79.50/kg EXW (ex-works), excluding freight, taxes and other charges, at an equivalent import parity of $1,160-1,200/tonne CFR India, across different regional markets and varying with price discounts given for bulk volume purchases.

PVC demand in India is dominated by use in underground irrigation systems. Agriculture has a 70% share in India’s PVC demand, while the construction sector accounts for the remaining 30%. Construction also slows down due to rains in the monsoon period.

India’s annual PVC demand is estimated at 2.25m tonnes, around 1.25m tonnes of which are sourced from the domestic market, while the rest imported.

PVC producers in India include Reliance Industries, Finolex Industries, Chemplast Sanmar and DCW.

($1 = Rs60.33)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections