Europe Dec PVC increases as ethylene rises during seasonal lull

20 December 2013 23:59 Source:ICIS News

LONDON (ICIS)--European polyvinyl chloride (PVC) contract prices have edged up slightly in December as higher upstream ethylene contract costs are weighed against the seasonal lull at year-end, said market players on Friday.

Producers had looked to pass on price rises of €15/tonne ($21/tonne) as a minimum in line with formula level increase and even larger increases in some cases for margin reasons. The cost ratio for ethylene into PVC is around 50% of the ethylene contact price move.

However, buyers have strongly resisted such proposed increases in December and were pushing for rollovers or to limit increases as much as possible, stating that it was difficult to justify any higher prices in December amid the year-end slowdown in activity.

In northwest Europe, price settlements were largely heard between plus €10-15/tonne in December, although some sellers conceded that price rises of €15/tonne had been challenging and had been difficult to implement and price rises of €10/tonne were most realistic amid mounting resistance from buyers and competitive offers from other sellers.

Rollovers and plus €5/tonne were mentioned by a few buyers in northwest Europe, but this was not seen to reflect a general price trend.

In other parts of Europe, price rises were more limited amid seasonally low demand and  particularly strong competition in the region. In the Mediterranean, price increases of €5-10/tonne were seen to be most realistic, although price rises of €15/tonne were also heard. In eastern Europe, there was a mix of rollovers and increases of €5/tonne as a maximum.

In the UK, price increases of £10/tonne were mainly mentioned. This is taking into account the cost pass through level as well as euro/pound sterling exchange rate fluctuation.

The price ranges have been changed  in December to €960-990/tonne FD (free delivered) NWE (northwest Europe) and €890-975/tonne FD Med and £850-875/tonne FD UK, according to ICIS.

Numbers below the range were heard in a few cases in the UK, but they were not widely confirmed.

Demand has been reasonable in the first half of December and slightly better when compared to December 2012, supported by mild winter so far, although a slowdown in activity the second half of the month is apparent because of downstream plant closures during the December holidays. Stricter inventory management control at year-end for working capital reasons was also leading to a lull in demand in the second half of December, according to some players. 

By contrast, a few sellers said they had seen good enquiries, despite the approaching holidays, which one of the suppliers attributed to some customers possibly pre-buying expecting higher prices in January.

PVC supply is generally good, despite some recent output and logistical constraints for a few players, because of lower demand at year-end. However, one or two sources did not rule out the possibility that material could become less available in January if demand picks up after the holidays and production rates do not react quickly enough.

($1 = €0.73)

By Heidi Finch