India PVC prices likely to see further falls on soft demand

Focus story by Michelle Lim

SINGAPORE (ICIS)–India’s PVC prices were expected to see a further slight drop in the next few weeks before stabilising around middle to end October, market players said on Tuesday.

Prices India have steadily fallen from $1,095-1,120/tonne CFR (cost & freight) India levels in the week ended 22 August, down to $1,030-1,050/tonne CFR India levels in the week ended 19 September as a result of weak demand, according to ICIS data.

PVC demand in India has been soft since July amid a delayed monsoon that has resulted in heavy rains and flooding, which is still affecting several parts of the country, especially the north.

The adverse conditions are not likely to subside for another one to two weeks, market sources added.

Until then, downstream demand is not expected to improve, and the market is also likely to be quite slow ahead of the Diwali holidays in the fourth week of October, said market sources.

Offers for October shipments from Taiwan’s Formosa Plastics Corp (FPC) were first announced last Wednesday at $1,070/tonne CFR India, down from $1,120/tonne CFR India offered for September shipments. Response to those offers was said to be poor, amid market talk that a further price reduction was on the cards.

Last Friday, FPC further reduced its October prices to $1,050/tonne CFR India in order to boost buying activities.

However, market participants said these prices were still high despite the $70/tonne reduction from FPC’s September offers.

Many traders expect other Asian producers to reduce their prices to similar or even lower levels, given the poor buying sentiments amid uncertain market conditions.

“Many of us bought import cargoes a month ago at $1,110-$1,120/tonne CFR India levels and we are making a huge loss right now,” said a trader. “We won’t hastily commit to another batch of cargoes until we see that prices have hit the bottom.”

Market participants felt that despite the weakening PVC market in China, it was unlikely that Chinese carbide-based PVC offers could go any lower than these price levels, after taking into account additional anti-dumping duties (ADDs) of $123/tonne.

Carbide-based PVC was typically cheaper than ethylene-based PVC due to its lower versatility, but recent price drops for the latter has significantly narrowed the gap between the two.

However, not all ethylene-based PVC producers were ready to offer prices at the same level as FPC.

A northeast Asian producer, for instance, kept its October offers at $1,060/tonne CFR India, $10/tonne higher than FPC’s offers.

“We would rather reduce operating rates than sell at a loss,” said a PVC producer which is also involved in the whole vinyl chain.

For now, all eyes are on the regional producers in India, who were said to be likely to reduce domestic prices by another Indian rupees (Rs) 2/kg in the next few days, according to industry sources.

Regional producers had last reduced domestic prices with effect from 5 September to Indian rupees (Rs) 74.50/kg ex-works (EXW), at an equivalent import parity of $1,070-$1,080/tonne CFR India across different regional markets.

Prior to that, domestic prices had been reduced with effect from 21 August, in response to FPC’s September offers, which were $20-30/tonne lower than August’s offers.

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