Weak demand to cap India PVC January price discussions

By Veena Pathare

SINGAPORE (ICIS)–Weak demand for polyvinyl chloride (PVC) in India is likely to cap price discussions for January shipments, with offers from major suppliers of imported material expected to be announced later this month, market sources said on Friday.

PVC prices in India were assessed at $1,020-1,040/tonne (€745-759/tonne) CFR (cost and freight) India on 6 December, unchanged from the previous week, according to ICIS.

While producers across markets deem a price increase necessary because of continued firmness in upstream ethylene costs, they are considering a roll-over of December prices for January PVC taking into account weak demand in India and the rest of Asia, industry sources said. (Please see the price chart below)

India’s extended monsoon season led to weak sales of pipes during the traditionally peak-purchase months of October and November, thus curbing converters’ appetite for PVC resins. A piling up of PVC inventories at local warehouses is weighing down on price ideas for January-loading cargoes, market sources said.

While sales of pipes, as well as those of resins, have picked up since early December, the present offtake could not make up for the sales lost during the peak purchase season, they said.

“October-November is the period when most farmers sow the seeds. But these months saw heavy monsoon this year. Now [the] rains have gone, but [the] planting season is over, and it is not possible to lay new pipes in December, when crops have already begun to grow,” a major PVC importer said.

Primary demand for PVC in India is from the agriculture sector, where the resin is widely used in subterranean or underground irrigation systems.

Agriculture has a 70% share in India’s PVC demand, while the construction sector accounts for the remaining 30%.

Local government elections recently conducted across multiple states in the south Asian country also had a dampening effect on PVC demand, as purchasing for several construction projects are put on hold for months, industry sources said.

Furthermore, a weakening of the Indian rupee in the foreign exchange market made imports more expensive, prompting importers to adopt a cautious stance on PVC purchasing, with many opting to purchase strictly on a need-to basis, market sources said.

There was also a domestic credit crunch because of higher interest rates, they said.

Traders were heard to be selling cargoes at hefty discounts and at prices far lower than the international market prices amid weak downstream demand.

“I am presently selling at a loss in the local markets at an equivalent of $990/tonne CFR India, because I have to move my stocks,” said a source at a regional trader, which sells imported northeast Asian cargoes to India.

Most market participants are hopeful of a pick-up in agricultural pipe and resins offtake in March-April, which marks the start of a new sowing season.

($1 = €0.73 / $1 = Rs61.93)

Read John Richardson and Malini Hariharan’s Asian Chemical Connections blog