Players brace for another month of major hikes in PVC, VCM in Asia

Players in Asia’s PVC markets are preparing for another month of steep increases in PVC and VCM prices, with a South Korean producer quotes higher May import offers to China, as per Chemorbis. Persistently limited VCM avails along with higher costs were cited as the main reasons for the ongoing increases in PVC prices. Spot VCM deals for April were concluded towards the end of March with increases of US$60/ton from March done deal levels. As VCM availability from Japan, Asia’s largest VCM producer, remains limited and upstream energy costs have been gaining over the past two weeks, most players expect to see higher initial May offers for VCM, although no clear sell ideas have been reported as of yet. Upstream, crude oil futures on the NYMEX have gained nearly US$5/barrel from the start of the month to surpass the US$112/barrel threshold while spot naphtha prices on a CFR Japan basis are up more than US$50/ton since the start of the month. Both crude oil and naphtha prices are currently trading at their highest levels since the summer of 2008. In China, a South Korean producer pioneered May PVC price hikes at the start of the week by announcing May prices with increases of US$80-90/ton from April done deal levels. Players had been expecting additional increases on May offers from mainstream Asian producers, although the initial May offers from the Korean producer were well above market expectations of US$20-50/ton increases expressed last week. Import PVC prices in China have a cumulative addition of US$220-260/ton over the past four months, with more than half of the total increase amount coming in April and May. In addition to higher upstream costs and reduced availability of Japanese cargoes, players commented that PVC demand has been picking up inside China recently, with several converters reportedly raising operating rates in response to stronger demand for their end products. Southeast Asia’s PVC market has also witnessed significant price increases over the past month. As many PVC producers in the region are non-integrated and dependent on imported VCM cargoes, the VCM shortage from Japan combined with a heavy turnaround season within the region has led to a severe VCM shortage and consequently reduced availability of PVC. A trader offering Taiwanese cargoes to Southeast Asia reported that they managed to conclude some deals last week at prices US$60/ton higher than their most recent done deal levels and US$170/ton higher than the initial April offer levels they had announced at the start of March. A Thai producer reported that they managed to conclude some April deals with increases of US$120-140/ton when compared with their March done deal levels, adding that their April deals were slightly higher than their initial offer levels for the month. Tracking the large increases seen in the import market, regional producers announced their April offers to their local markets last week with increases of US$80-138/ton when compared with their most recent March deals, with most sellers commenting that they are feeling confident of their ability to conclude deals at their new price levels. Import PVC prices to the Indian market have also been moving higher in accordance with firming regional trends. When compared with the same time last month, import offers on a CIF India, cash equivalent basis have risen by US$50-200/ton. Traders complained that their overseas suppliers have approached them with significant hikes when compared with their prices from the previous month, adding that they are unwilling to purchase at these levels as they do not believe that converters will accept these prices. While these traders say that they are currently negotiating with their suppliers in the hope of receiving more modest month over month increases, traders still expressed their new sell ideas with hefty increases of around US$50/ton when compared with the past month. Inside India, domestic producers announced increases of INR1500/ton (US$34/ton) at the first of April, citing stronger import prices as the main reason for their price increases.