Asia PVC may firm on low supply from China; upside limited

SINGAPORE (ICIS)–Asia’s polyvinyl chloride (PVC) prices are expected to firm in December on limited export volumes from China, but any upside may be limited by year-end demand lull and a cash crisis in the key Indian market, industry sources said on Wednesday.

On 18 November, spot PVC prices were assessed at $920-940/tonne CFR (cost and freight) China, $930-940/tonne CFR southeast (SE) Asia, and $965-1,000/tonne CFR India, according to ICIS data.

Selling sentiment throughout Asia is bullish given limited availability of supply coming from China. Chinese producers have not been keen on exports since domestic PVC prices have been trending higher since July, market sources said.

Taiwanese PVC major Formosa Plastics Corp (FPC) has hiked its December export prices and other Asian suppliers are expected to follow suit.

However, some market participants cautioned that weaker demand in India will limit any further price gains.

Buying sentiment took a bearish turn in the country, which is a major PVC importer in India, with the government’s ban of higher denomination currency notes to curb tax evasion.

The demonetization of Indian rupee (Rs) 500 and Rs1,000 notes affects PVC traders and end-users, which usually transact on cash basis. Buying interests for December-loading cargoes are expected to soften, especially in light of higher offers, market sources said.

“I have my doubts that this round of PVC [price hike] will be fruitful for any supplier… the situation is kind of bad in India now,” said an India-based PVC trader.

“The ban [of Rs500 and Rs1,000 notes] has already affected the sales of our company,” he said. 

“Demand is very affected by the rupee issue, there will definitely be less buying and people are unable to make purchases. They [the suppliers] should just sell everything to China,” another trader said.

However, Asian producers are confident that higher prices will be underpinned by China’s strong domestic PVC market amid good offtake in the country.

“Offers are unlikely to be lowered. We will sell more to China if there is poor offtake in India,” a northeast Asian producer said.

“Demand is likely to be good [in China] for December cargoes as people will buy ahead of the Chinese New Year in January,” he said.

China’s domestic PVC prices have been soaring over the past five months on the back of rising PVC futures, and amid some prescribed limits on volumes that can be transported within the country. High production costs have also kept a lid on producers’ inventories amid stronger demand from end-users.

Meanwhile, some PVC facilities in the country are either shut or running at extremely low rates amid ongoing environmental inspections.

In southeast Asia, buying interest typically weakens toward the end of the year, with prices likely to be dictated by movements in China and India.

Focus article by Jeslyn Lerh

Additional reporting by Kite Chong

Top photo: Polyvinyl chloride (PVC) is used in pipes. (Source: imageBROKER/REX/Shutterstock)