Asian PVC squeezed between costs and demand

After the awaited announcement of a major Taiwanese producer for August PVC offers, the reaction of the Asian PVC market is being gauged, as per ChemOrbis. Buyers and sellers are playing a tug of war as both sides are well supported by their arguments. Accordingly, the Asian PVC market is squeezed between high upstream costs and unsatisfactory demand from the downstream PVC market. The Taiwanese producer is seeking US$10/ton hikes in China and Southeast Asia and US$20/ton hikes in India for August PVC shipments. A producer source argued that their allocation is less than normal as they are planning a shutdown in August. “Plus, ethylene costs are firming and Indian demand is still satisfactory,” he added. A distributor based in Mumbai also affirmed that some of the states in India are facing drought and this allows the construction work to carry on. “Accordingly, there is still some demand for PVC,” he commented. The producer’s move was widely expected among players. “Asian PVC buyers in China and Southeast Asia are quite reluctant to accept a new round of price hikes particularly when the competitive pressure from acetylene based PVC prices persists in the local market. These slight increases are pronounced to keep the market stable and prevent a softening sentiment,” argued a distributor in Shanghai. A converter in Mumbai also said, “We don’t think that these hike requests will materialize. Some traders offering Taiwanese origin in India have admitted that the new prices are meeting resistance from the market.” A distributor in Gujarat, on the other hand, is considering accepting the new higher offers from the producer as he has no stocks. “PVC buyers maintain their purchases in India and cheaper acetylene based PVC prices do not attract much interest here,” he said. Other regional producers are now waiting to see the full market response to the new offers of the Taiwanese supplier before revealing their own prices. They have cautiously raised their sell ideas by US$10/ton, arguing that they will need to reflect their higher ethylene and VCM costs. “However, we think that we should still wait and see the response of downstream converters. This is because demand remains mediocre and we are facing fierce competition from the attractively priced acetylene based PVC prices,” said a Chinese producer in Taicang, East China. As can be seen from the graph below prepared by ChemOrbis Price Wizard, the current gap between ethylene and acetylene based PVC hovers around historic highs of US$150/ton. According to ChemOrbis a South Korean producer also voiced similar comments, saying, “It may be difficult to achieve price hikes in China and Southeast Asia due to sluggish demand, even though price hikes are justified by costs. Plus, the US ethylene has soared too and export PVC offers from the country will remain firm.”