SINGAPORE (ICIS)--China’s polyvinyl chloride (PVC) prices are expected to be supported by improved sentiment following the government’s economic stimulus measures, in spite of downward pressure from continued weakness in demand.
In the week ended 1 March, spot PVC multi-purpose import prices were assessed at $890/tonne CFR (cost and freight) China, unchanged for the sixth straight week since 18 January, according to ICIS data.
Demand was lackluster for March-loading shipments amid uncertainties in the ongoing US-China trade negotiations.
Market participants are waiting for fresh April-loading PVC shipments, which are likely to be announced in mid-March.Construction in Beijing, China (Photo by Rolex Dela Pena/EPA/REX/Shutterstock)
Demand for PVC is expected to be boosted as the Chinese government is targeting to speed up infrastructure projects, with plans to issue CNY1.3tr worth of financing to boost consumption as it steps up efforts to stimulate its sagging economy.
Construction and infrastructure sectors are the main downstream industries of PVC.
Another positive development is the Chinese government’s proposed reduction of the value added tax (VAT) rate on manufacturing to 13% from the present 16%, and cut the rates for transportation and construction to 9% from 10%, although no dates for implementation were confirmed.
In January, China’s PVC imports totaled 72,148 tonnes, down 13% year on year and down 4% month on month, official data showed.
PVC demand in the country tends to recover in February, after the Lunar New Year holidays, but it has remained sluggish this year, with many downstream customers taking extended breaks, according to market participants.
The Chinese economy is expected to slow down this year, and this could limit any upbeat market expectations.
China has set its 2019 GDP growth target at 6.0-6.5%, down from a 28-year low of 6.6% in 2018, partly due to the trade war with the US, which began in July last year.
For Chinese finished goods containing PVC, the US imposed tariffs of 10% in September last year.
Meanwhile, the overall PVC market in Asia is also being weighed down by availability of competitively-priced deep-sea cargo from the US.
In the week ended 1 March, average spot prices of deep-sea origin PVC were stable week on week at $820/tonne CFR China, lower by around $70/tonne compared with those of Asian-origin material.
US PVC producers enjoy cost advantages over their Asian peers due to cheaper prices of shale-derived feedstock ethylene.
Focus article by Jonathan Chou
($1 = CNY6.71)
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