China’s domestic PVC market has been mostly unresponsive to the steadily rising import prices since the beginning of 2012, causing the domestic market to trade at a discount when compared to imports, as per ChemOrbis. Contrary to the revived demand in many other regions that paved the way for import prices to rise, buying interest has been sluggish in China’s domestic PVC market. Many producers complain about having to work with unsatisfactory margins as they cannot up-adjust their domestic PVC prices to avoid further dampening demand inside the country further. Indeed, persistent problems about the global economy have resulted in slower demand for all end product applications in China. The world’s second largest economy faced its largest trade deficit in 23 years in February as Europe’s debt crisis hampered overall exports while overall imports surged following the Chinese New Year holidays. While China’s economic growth has moderated for the past four quarters in line with the curbed export demand and the government’s earlier decision about restricting lending in order to tame inflation, the Chinese government cut its economic growth target to 7.5% for 2012 in early March for the first time after keeping it at around 8% for the past seven consecutive years.
All these developments have, needless to say, weighed down on PVC demand inside China. This week two domestic producers told ChemOrbis, “Any price hike attempt will be met with great resistance and therefore, we are holding our offers steady. However, the existing purchases are still in small to medium tonnages.” A producer blamed oversupply for this situation, noting that overall utilization rates of PVC plants stood at 60% last year while the majority of PVC plants continue to run at reduced rates of around 50% this year. A pipe manufacturer in North China bought some cargoes, remarking, “Our business is not satisfying at all as a result of the contraction in the housing market in general.” According to media reports, China’s property market, which has long been an engine of the country’s economic growth, has slowed sharply as a result of tighter monetary conditions, and Beijing’s efforts to combat rising property prices by pushing up deposit requirements, and introducing restrictions on people buying their second and third homes.
The domestic PVC market lost its premium over imports at the beginning of the year and it has been trading below imports with the gap steadily widening since then even before considering customs duties, anti-dumping duties and clearing and handling charges that would have to be added to the import cargoes. Now that import PVC deals are being concluded with a new round of increases for April shipments in China on the back of firm feedstock costs along with limited availability in global markets, Chinese exporters are also reporting seeing healthy demand from overseas markets. While further contraction is expected in China’s property market, causing local PVC demand to deteriorate, Chinese producers are likely to continue looking for alternative outlets to relieve their sales pressure.