News story of the week: Taiwan’s FPC raises PVC offers, others likely to follow suit

12 April 2016 | By: Kite Chong

focus story

SINGAPORE (ICIS)--Taiwan’s Formosa Plastics Corp (FPC) announced its polyvinyl chloride (PVC) May-lifting offers to India, China, southeast Asia and other regions at $30/tonne firmer, a move likely to be followed by other producers, market sources said on Tuesday. (please see table below)

As carbide-based PVC prices were softening, FPC chose to set the month-on-month price increase at $30/tonne and not greater, sources said. This would render most carbide-based PVC export uncompetitive, the company source explained.

Even though Chinese domestic prices of carbide-based PVC had been softening in recent weeks, most Chinese producers would not be able to offer carbide-based PVC exports at competitive rates compared to FPC’s latest offers, the source elaborated.

In addition, demand was stable in most countries and regions aside from India, hence any increase greater than $30/tonne would likely meet with stiff resistance, the source elaborated.

An Indian importer of ethylene-based PVC said the price was already close to $900/tonne level, deemed too high by the local market.

“It is very challenging to sell cargoes after the announcement of the May prices,” the Indian PVC importer who buys cargoes from Formosa said.

However, most market participants said the price increase was reasonable and within their expectations, although most were surprised by FPC’s timing; they expected FPC to announce their new offers by around mid-week.

As a result, most producers and traders said that they would offer later in the week or next week at similar levels.

However, most sellers were confident that Indian buyers would be receptive of FPC’s new offers as small volumes of April-lifting cargoes were offered and had been accepted in previous week.

Hence, compared to the last one to two weeks, FPC’s offers were stable rather than firmer, a northeast Asia trader explained.

In addition, FPC’s May offers were within buyers’ expectations as some previously expected FPC to offer as high as $900/tonne CIF (cost, insurance & freight) India.

Although demand was still robust, some felt that buying interest could be slightly softer for the May-loading period as buyers might hold off their PVC purchases till the June-loading period in anticipation of softer prices.

Chinese demand was expected to be stable but weak.

Although buyers were unlikely to be receptive to firmer offers, they had little alternatives as most sellers would be offering the bulk of their cargoes to India.

In addition, there was not expected to be large volumes of competitive deep-sea cargoes available from the U.S. due to firming prices and tight domestic supply over there, a few northeast Asia traders said.

There was no May-loading negotiations heard in southeast Asia on Monday as it was too early for market participants to commence May-lifting negotiations.

Key producers in Thailand were unlikely to start offering this week due to the Songkran Festival on 13 to 14 April.

Some southeast Asia producers were cautious that southeast Asia buyers might purchase less May-loading cargoes, and instead purchase more next month due to expectations of softer June-lifting prices.

However, a major southeast Asia producer noted that there had been less speculative demand recently with buyers preferring to purchase hand-to-mouth.

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