OUTLOOK '18: European PVC demand to rise, feedstocks to tighten

Source: ICIS News

2018/01/09

LONDON (ICIS)--The European polyvinyl chloride (PVC) market is likely to see solid demand growth in 2018 although supply may be affected because of possible higher chlorine run rates, with feedstocks expected to structurally tighten due to the closure of some chlorine capacity.

Global demand is expected to remain solid, with India producing consistently strong demand growth year on year and the Chinese market likely to remain tight due to the impact of environmental regulations.

The European economic outlook is healthy, which is also expected to directly lead to higher PVC demand due to its strong connection with industries such as construction and the automobile sector.

However, a complicating factor will be the production level of feedstock chlorine's co-product caustic soda.

The European caustic soda market has structurally tightened as a result of the phasing out of mercury cell capacity for the deadline of December 2017, which caused a major price spike in the second half (H2) of 2017.

This will incentivise European producers to increase their chlorine capacity utilisation, which may locally or overall increase production of chlorine and therefore downstream products such as PVC.

Early signs of this trend are already evident in the higher than average chlorine utilisation in 2017, with run rates reaching a level not seen since the peak of the PVC market in 2006-2008.

 

Conversely, the European ethylene dichloride (EDC) and vinyl chloride monomer (VCM) markets will become structurally tighter in 2018 due to the closure of mercury-based chlorine capacity in Europe, which will result in closures at INOVYN's plant at Martorell, Spain, and the Spolana/Unipetrol plant in Neratovice, Czech Republic, among other locations.

Europe is expected to change from being a net exporter of 250,000 tonnes/year of EDC to a net importer of 175,000 tonnes/year.

However, with some spare capacity in the market due to Dow's plant and Schkopau, Germany, lacking an accompanying PVC plant, there is some room to stretch additional capacity.

Possible candidates for additional imports include the US and Middle Eastern producers.

If choralkali run rates rise, whilst imports of feedstocks also rise, this is likely to raise PVC availability in Europe.

As a result, of these countervailing trends, the overall outlook for PVC is mostly balanced in terms of supply and demand for at least the first half of 2018.

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