Volatile costs, Formosa outage result in cloudy PVC outlook in Asia

20-May-11
In Asia, producers wait to announce import PVC prices to China for June, as they feel uncertain about the market outlook for the coming month owing to volatile upstream costs and a recent outage at Formosa’s petrochemical complex in Mailiao, Taiwan, as per Chemorbis. Players are divided as to the likely impact of Formosa’s outage on PVC supply in the coming month. PVC prices were pushed higher in April and May owing to persistent PVC and VCM shortages following the March 11 earthquake in Japan, Asia’s largest VCM producer. Players in Southeast Asia report that VCM shortages within the region are beginning to ease this week while traders in China say that Japanese PVC producers are set to return to the market soon after having been largely absent from the market for the past two months. May import PVC business for Asian origins to China has been mostly concluded with increases of US$40-75/ton from the April done deal level. Earlier this month, players had predicted that June import offers would be initially announced with increases of around US$20/ton from May done deal level. The expected June increases were questioned towards the middle of the month as crude oil prices declined below the US$100/barrel threshold to hover between US$96-103/barrel after beginning the month above US$113/barrel on the Nymex. The recent outage at Formosa’s Mailiao complex has renewed expectations of higher prices for June, with most players currently predict initial June offers to be announced early next week with rollovers to increases of up to US$20/ton from May done deal levels. PVC demand has been relatively strong within China over the past month, with most converters increasing raw material purchases in accordance with the impending high season in the construction sector. Demand has faltered a bit this week as lower futures prices for PVC and carbide have encouraged buyers to adopt a wait and watch approach for the near term in a bid to get a clearer idea of the market direction. Although demand for end products is picking up, converters complain of operating with reduced margins owing to persistently rising raw material prices. In Southeast Asia, local PVC prices for June are expected to be stable to softer from May as supply concerns are beginning to ease within the region, while demand has begun to stall as the upcoming rainy season in the region is expected to depress demand while buyers are also hesitant to purchase owing to the widespread uncertainty as to the future market direction. Import prices have lost ground on the higher end of the range over the past two weeks as sellers have had to step back on prices now that supply is loosening in the region, while traders offering at the lower end of the range are no longer willing to give discounts on their offers given the present uncertainty as to the medium term supply outlook.
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