OUTLOOK ’18: Indian PVC demand set to emerge stronger in Q1 2018

SINGAPORE (ICIS)–Polyvinyl chloride (PVC) demand in India is set to improve in the first quarter of 2018, as pipe laying enters into its peak season.

Seasonally stronger demand for pipes from the agricultural sector is expected to push resin consumption, also supporting prices in the first quarter of the year, according to market sources.

Market players generally deem that PVC has bottomed out in December, with prices for January shipments netting a $20-30/tonne from those from December lots.

Market participants in India had been hopeful of an uptick in resin demand late in the year, but have failed to see any improvement since June of 2017.

Seasonally slow pipe sales during the monsoon season largely weighed on demand for resin in the typically slow months of June to September.

Demand failed to improve even after September, owing to an extended monsoon across different parts of the country.

A majority of regional processors held sufficient stocks of finished pipes, and this curbed demand and hampered resin prices in October and November.

Separately, companies, particularly plastics processors also took time to adjust to the new goods and service tax (GST) structure in place from July last year.

Adjusting to the new workflows surrounding the new GST structure also meant tighter cash flows, curtailing PVC resin purchases, according to market sources.

The Indian PVC market is now poised for a recovery, as processors would look to stock up for the pipe-laying season that began in December, regional importers said.

“I think the worse for Indian PVC market is over, and 2018 should be better in terms of demand as well as prices, not just for India but also across key global regions,” an Indian importer said.

About 70 per cent of the total demand for PVC in India comes from the pipes sector as PVC is widely used in the manufacture of underground irrigation and water distribution pipes.

The remaining 30 percent of demand comes from the construction sector where PVC is used to manufacture films, profiles, insulation and in calendaring applications.

The first quarter of 2018 is also poised to see improved demand, spurred by a need to replenish stocks after the year-end break, lending a firmer outlook to prices.

US PVC spot prices for January shipments have also netted an increase, as producers raised offers on expectations of stronger demand emerging from the US domestic market.

A sharp uptick in resin demand within the US is poised to emerge from reconstruction and re-building efforts after three hurricanes and an outbreak of wildfires in the western part of the country damaged more than 10,000 structures.

Furthermore, stronger demand from China to restock inventories ahead of the Lunar New Year holidays in February is also likely to bring buyers to the fore in January.

The tightening of environmental regulations towards reducing emissions and pollution in China is also likely to affect China’s domestic carbide-based PVC production, and could possibly increase its reliance on imports, according to market sources.

With India depending on imports to meet more than 50 per cent of its total demand, stronger demand from China would have an impact on Indian PVC prices.

“Increased Chinese demand is likely to fuel greater demand for Asian cargoes within the region, impacting prices to India since Asian suppliers’ allocations may be impacted”, an Indian trader said.

Additional reporting by Bill Bowen

Outlook article by Veena Pathare