Despite lull, PVC prices likely to remain firm at the start of 2010 on high feedstock costs

31-Dec-09

Asian polyvinyl chloride (PVC) prices are likely to remain firm at the start of next year due to high feedstock costs despite a seasonal lull in demand as per ICIS. Asian PVC prices have increased by around 7.6% in the past two months to US$900-940/ton CFR China Main Port (CMP) even though a harsh winter in the key Chinese market had weakened PVC demand. The main driver of this price hike is the high price of ethylene that continued to rise despite faltering crude prices. Ethylene prices rose to a 15-month high of US$1160-1200/ton CFR NE Asia this month on a combination of tight supply and strong demand from downstream sectors. EDC prices increased to US$450-480/ton CFR NE Asia while VCM producers offered January cargoes at US$800/ton, compared to US$720-730/ton in the previous month. The trend appeared set to continue and ethylene spot prices in Asia seem set to peak to fresh highs in 2010 due to persistent supply tightness and a heavy cracker turnaround schedule in the region. The price increase is likely to be limited as demand would remain weak until mid-February when China closes for a week long Lunar New Year holidays. China, despite having the world’s largest PVC production capacity, recorded a surge in ethylene-based PVC imports in 2009 due to falling ethylene prices while the country’s domestic PVC market struggled with low operating rates. China had imported around 1.2m tons by June 2009, exceeding the 1 mln ton imported for the whole of 2008. High feedstock costs and poor demand would present a tough business environment for PVC producers in 2010, but market players said they were hoping the upward pressure on ethylene prices would ease as many new crackers in the Middle East and Asia would be up and running before the end of the first quarter of next year.