European PVC producers complain about unsustainable margins in Italy

09-Nov-11

Following the gradual decreases seen last month, local PVC prices in Italy are tracking a stable to soft trend for November, as per Chemorbis. Squeezed between high costs vs poor demand, most PVC producers prefer to be cautious with November pricing strategies. Suppliers lament that their margins are not sustainable despite lower ethylene settlements for November because PVC prices dipped too low. Additionally, converters, faced with the low season for many PVC applications, are seeking lower prices as they need to close this year with positive margins. Following a €20/ton drop in the November ethylene contracts, European producers prefer to wait for a while before revealing their initial prices as they want to settle their new agreements with rollovers or only small decreases in order to preserve their margins. A converter said he received very few calls from their suppliers so far this month, “which may be because sellers don’t want to call and offer lower prices before seeing the demand situation,” as per Chemorbis. “It is obvious that feedstock costs decreased but it is still really difficult to maintain low PVC prices with current costs. We will try to keep our prices stable this month despite the resistance from buyers and the overall weak demand,” a company source at a West European producer stated. A converter also reported that his West European GA supplier is determined to keep their prices stable or give away no more than small decreases this month in order to save their margins. Some buyers have also started to question whether prices are moving to the bottom level. “As the new ethylene contracts posted only a €20/ton decrease, it will be difficult for PVC producers to work with high feedstock costs while PVC prices are too low,” a converter admitted. “PVC prices are moving close to the bottom, producers cannot continue to sell at such low prices,” another buyer had commented earlier. In the spot market, however, some distributors, who initially tried stable prices, are ready to step back from their pricing strategies owing to buyers’ resistance. A distributor who came with rollovers for Central European PVC this month said he couldn’t achieve any deals so far. He feels that he will have to revise his current prices down in the coming days.