Europe PVC outlook improves on healthier demand as construction recovers

Author: Chris Barker

2020/08/14

LONDON (ICIS)--European polyvinyl chloride (PVC) demand has risen in the third quarter on the back of a recovery in downstream sectors, including the key construction industry.

Contract price discussions are underway for August with initial expectations in line with or higher than the cost increase from feedstocks.

The firmer outlook is tempered by lower activity commercial in southern Europe during the summer lull, although there were indications that August was likely to be a stronger month than normal trends as market players restock following the long period of inactivity in the second quarter.

Sellers have independently proposed price rises for the month, equivalent to the cost increase from ethylene or above, as a result of the balanced or balanced-to-tight market.

"Negotiations are still ongoing, however, it looks like for an €15-20/tonne increase in Aug, though slightly ahead of feedstock cost changes," one producer said.

DOWNSTREAM DEMAND RECOVERS
Construction demand has increased in July and August, recovering to typical levels for the time of year as the effects of the lockdown have faded.

“Demand is pretty strong, partly related to the strong construction economy in NW Europe especially,” one producer said.

“We consider the restocking is a smaller effect as this was more seen in June...Actually, it seems to be more the real underlying demand,” it added.

The automotive market has also recovered, with one market source seeing consumption at 90% of the level of a typical year, after being mostly inactive in the second quarter.

August is typically a quiet month for PVC consumption because of holidays in southern Europe, with demand falling by approximately 50% compared to a typical month.

However, there were indications that demand would be above typical levels in 2020 as many of the typical shutdowns for the market have already taken place. One trader saw demand at 65-70% of a normal month rather than 50%.

“Demand is healthy…some industries are going into holidays. But not to the typical extent, in many cases the holiday shutdowns are shorter than normal,” a producer said.

AVAILABILITY TIGHTENS
Several producers have also experienced production issues in Q3 which have contributed to tighter availability. Anwil and Vinnolit had lower PVC output in July, according to several market sources, although there were no updates received in August.

In addition, Vynova suffered a production issue from early to mid-July which reduced its output at Wilhelmshaven by 50%.

EXPORT PRICES UP
Export demand has also increased in line with the overall recovery of the PVC market, with spot prices rising to above the level of the domestic spot prices in Europe.

The increase in export prices has been driven partially by higher demand and partially by production issues in Europe, with sources seeing lower availability from several producers.

“[For] Europe, the USA, everyone is cutting [supply] down,” one producer noted.

Front page picture: A construction site in Spain; archive image 
Source: Manu Fernandez/AP/Shutterstock

Focus article by Chris Barker

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