Asian PVC rises on anticipated improvement in demand, lacks support on weak Mediterranean demand

25-Feb-10
Start of the high season for many PVC applications in China is expected to lead to demand improvement. Offers to China from a producer in Taiwan for March PVC have been raised by US$10-20/ton over February deal conclusion at US$1040/ton CFR China, as per Chemorbis. This change was in line with pre-holiday expectations corresponding with the limited supplies at the producers’ side, firm costs and the anticipation of demand improvement. While more producers are expected to approach the Chinese market with similar import prices, current buy interest remains restricted although the Taiwanese producer claims to have started negotiations with few customers. Also, some March import offers which were announced higher just before the holidays in Southeast Asia remain steady at US$1050/ton on CIF basis. Some done deals have already been reported from Vietnam at US$1040/ton CIF SE Asia with sellers describing the demand in the region as satisfactory. While demand in Asia indicates another bullish month, the Mediterranean region fails to catch up with this persistent uptrend, not giving support to Asian producers this month. Demand in Mediterranean countries including Turkey, Egypt and Italy has been so poor that it has restricted purchases made from Asia for the last two months. Buyers from these countries continue to prefer comfortable local supplies for their already limited requirements, which provide a much better alternative when compared to imports. Therefore, while there have been no offers reported from Asia in the Egyptian market for quite some time, the Turkish PVC market has been seeing some regional offers at levels standing well below the theoretical netback calculations. Taking the recent offer level in China into account, Asian PVC should theoretically be offered to the Mediterranean countries at US$1190/ton after deducting US$20/ton freight cost back to the originating country and adding US$170/ton freight to the region, disregarding traders’ margin. However, Asian k67 offers in Turkey are currently standing at US$1065-1080/ton CFR, cash, subject to 3% or 6.5% duty depending on the origin. Demand in the Italian market is not doing well either although it is expected to improve in line with the start of the high season for the construction sector. Needless to mention, sovereign debt problems have already weighed down on the economic outlook, to which PVC is very sensitive. Due to lack of demand, the Italian PVC market has already lagged well behind the global rising trend and the current spot prices in the country are trading even below the neighboring Turkish market. Accordingly, it is believed that any rally in the Mediterranean triggered by the Asian PVC market will be delayed or kept in check until the local supplies in these countries dwindle down and demand revives.
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