Mideast PVC under pressure from influx of US cargoes, weak demand

SINGAPORE (ICIS)–Spot polyvinyl chloride (PVC) prices in the Middle East are under downward pressure from an influx of deep-sea cargoes amid threats of a trade war between China and the US.

“Currently, the availability of US material is very high. More US PVC has been entering the GCC (Gulf Cooperation Council) these few weeks,” a trader said.

Offers from US suppliers stood at $890-900/tonne CFR (cost and freight) GCC this week, while bids were at $860-870/tonne CFR GCC.

“I’ve been hearing of more offers from the US. It’s definitely more than usual,” the trader said.

Spot PVC prices in the GCC have been falling since 9 March, shedding 9.1% over a period of six weeks to an average of $905/tonne CFR on 13 April, according to ICIS data.

The price decline was due to ample supply of the material and slowing demand with the approach of Ramadan, the Muslim fasting month that will start in mid-May.

US suppliers have reduced their PVC offers to the Middle East on lower feedstock ethylene prices, which fell to a 16-year low amid fears of an escalating trade war between China and the US.

“If the tariff on US-origin PVC is implemented by China, then the US PVC suppliers will divert their cargoes to the Gulf Cooperation Council (GCC),” a second trader said.

China has proposed a 25% tariff on PVC from the US. Both US PVC and ethylene dichloride (EDC) are included in China’s list of possible tariff targets.

The northeast Asian country is a major consumer of US PVC. Exports to China accounted for about 11% of total US PVC exports in 2017.

Amid a possible trade war between the US and China, the Middle East appears to be the choice destination for US PVC.

But increased deep-sea supply is coming at a time when Middle East PVC demand is expected to weaken further due to Ramadan, with spot prices likely to be on a downtrend from May to June.

Focus article by Danielle Goh

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