Europe PVC sellers push for May price rises on margins, buyers resist

08 May 2014 18:35 Source:ICIS News

LONDON (ICIS)--European polyvinyl chloride (PVC) producers are bullish on price rises for May despite little change in ethylene feedstock costs, but buyers generally are resisting an upward move on good availability and reasonable but not strong demand, said market players on Thursday.

Some producers are targeting increases of €25-50/tonne, although the larger price hike is likely to be spread over May and June. 

They cite the ongoing need to recoup lost ECU (electrochemical unit) margins, caused by continued weakness in the caustic soda market, and expect their upward price initiative to be supported by seasonally healthy PVC demand from the downstream construction sector.

A few suppliers said that they had already implemented some increases of €15-35/tonne in parts of Europe and plus £20/tonne in the UK/Ireland. However, these levels of increases have not been confirmed on the buy side.

By contrast, some buying sources in the UK/Ireland said that they have concluded some price rollovers from a few suppliers. However, the latter has not been confirmed on the sell side. These buyers acknowledge that one supplier is being particularly bullish on price and they have not concluded any business with this player yet.

These buyers consider price stability to be most realistic in view of little change in ethylene raw material costs. They also referred to sellers also retaining some of the cost relief in the ethylene contract price over the last few months, which they said has provided some margin recovery for PVC sellers, albeit modest.

In addition, buyers said that the market is largely balanced, which suggests that price stability is most realistic. There is also a general feeling among buyers that it is not justified for PVC buyers to have to compensate for the weakness in the caustic soda market.

One customer said that it had accepted a minor increase of €5-10/tonne for May, but acknowledged that this was for cable rather than pipe-grade PVC. It attributed the slight price rise to sellers’ need to address margin erosion and supported by a spate of plant maintenances.

Consumption is seasonally healthy in the downstream construction sector in northwest Europe and the UK/Ireland.  Construction activity traditionally picks up in the spring and summer months amid favourable weather conditions.

One customer, by contrast, suggested that demand is not as healthy as expected, suggesting that better than anticipated activity in the first quarter due to mild winter weather is limiting the potential for any seasonal pick-up in demand in the second quarter. However, this has not been widely confirmed.  In addition, the same source suggested that a number of public holidays taking place during May in parts of Europe are also likely to limit activity to some extent.

Availability is generally described as sufficient to good, although one producer said it is tight in its system amid healthy demand and some recent and current plant maintenances.

European PVC contract prices in April were assessed at €965-985/tonne FD (free delivered) NWE (northwest Europe). €895-965/tonne FD MED (Mediterranean) and £840-865/tonne in the UK, according to ICIS. This reflects reductions of €5/tonne in mainland Europe and £5/tonne in the UK.

By Heidi Finch