The premium carried by ethylene based PVC over acetylene based PVC has narrowed to equal the lowest levels seen in the past year in China, while players report that the gap is narrower still in the Southeast Asian market, according to data from ChemOrbis Price Index. Weaker crude oil and ethylene feedstock costs were cited as the main reasons for the drop in ethylene based PVC prices, while offers for acetylene based PVC were said to be holding largely steady as producers are already operating close to their breakeven point and are therefore reluctant to agree to further reductions.
For most of the past year, ethylene based PVC prices on an Ex-warehouse China basis have been trading with a premium of between US$130-160/ton over acetylene based PVC. This represented record high premiums for conventional PVC as data from previous years showed that the premium on ethylene based PVC rarely moved above US$50/ton and did not breach the US$100/ton threshold until late 2013. While ethylene based PVC still carried a premium of around US$150/ton as late as mid-October, the premium has since retreated to around US$100-105/ton, matching the lowest levels seen for the past year. One of the results of the strong premium carried by ethylene based PVC was that acetylene based PVC producers were able to increase their market share both within China and in other regional markets such as India and Southeast Asia. With prices for conventional PVC being driven lower by weaker ethylene and crude oil prices, some producers comment that they are prepared to be aggressive in their pricing in order to win back some of the market share lost to acetylene based materials.
According to ChemOrbis, a source from a Taiwanese major commented, “We believe that acetylene based PVC producers are already operating near their breakeven point and that they will not be able to maintain their competitiveness if prices for conventional PVC move lower. We are willing to consider lowering our prices for the coming month by an amount large enough to allow us to reclaim some market share from acetylene based producers.” A trader based in China, who offers acetylene based PVC to Malaysia, added, “Theoretical costs for ethylene based PVC have fallen to levels that will allow producers to compete with acetylene based cargoes on price. Furthermore, prices for ethylene based cargoes may see additional reductions if crude oil and spot ethylene prices continue to retreat.”