Acetylene based PVC trades at a premium to ethylene based in China

26-Dec-14

Players in China report that acetylene based PVC prices in the local market have gained a premium over ethylene based PVC triggered by steep declines in spot ethylene prices, which have eroded the cost advantage enjoyed by acetylene based PVC producers. This is a significant change in market dynamics compared with three months ago, when the premium for ethylene based PVC prices stood close to an all-time high of around US$150/ton over acetylene based PVC (ex-warehouse China, cash inc VAT basis) according to data from ChemOrbis Price Index. For much of 2014, ethylene based PVC prices carried a premium of approximately US$105-160/ton over acetylene based PVC, with the upper end of the range representing an all-time high. While the premium stood at around US$150/ton just after the National Day holidays in October, the premium had dropped below US$100/ton by November before ethylene based PVC prices moved into a discount of US$25/ton relative to acetylene based PVC in the current week. Acetylene based PVC had last traded with a premium to ethylene based PVC in September of 2008. According to ChemOrbis, a source at an ethylene based PVC producer commented, “Local prices fell CNY300-400/ton (US$49-65/ton) on the back of weaker upstream costs and the globally declining trend. We are seeing good demand from the local market these days as our prices are now more competitive than the prevailing offers for acetylene based PVC.” A source from an acetylene based producer added, “We are struggling to compete with offers for ethylene based PVC as ethylene based producers have more room to reduce their prices relative to acetylene based sellers and are therefore able to offer at more attractive prices. We are not offering any cargoes for export these days as we are seeing better netbacks from the local market.”