Premium on ethylene PVC over acetylene at lowest level in a year

28-Nov-14

Players in China report that the premium carried by ethylene based PVC over acetylene based in the local market has fallen to the lowest level seen in over a year, as rapidly declining spot ethylene prices have eroded the cost advantage previously enjoyed by acetylene based suppliers, as per ChemOrbis. The narrowing of the gap is still more noticeable in major export destinations such as Southeast Asia, where offers for acetylene based PVC are becoming increasingly scarce as ethylene and acetylene based PVC are currently trading close to par. According to data from ChemOrbis Price Index, ethylene based PVC prices on an ex-warehouse China basis are currently trading with a premium of around US$85/ton over prices for acetylene based PVC. The premium for ethylene based PVC had risen to a record high of almost US$160/ton earlier in the year and the premium had not fallen below the US$100/ton threshold since the first week of November in 2013. “We had been using acetylene based PVC, but now we are switching back to conventional PVC as it is even cheaper than acetylene based cargoes in some cases. We are seeing regular demand for our end products, but we do not expect to see a general pick-up in demand until the second quarter of 2015,” a buyer based in Malaysia stated. “We are receiving a good number of inquiries from Malaysia these days as many converters in that country are considering switching back to ethylene based PVC as acetylene based cargoes have lost their competitive advantage,” a source at a Chinese ethylene based PVC producer reported. A distributor based in Shanghai commented, “The premium for ethylene based PVC over acetylene based PVC is narrowing due to the ongoing declines in ethylene costs. We believe that the gap between these two products will continue to decline and that ethylene based PVC will become a more cost competitive option.” According to ChemOrbis, a source from an acetylene based PVC producer stated, “We have suspended our export activity for now due to strong competition from competitively-priced ethylene based cargoes. We are trying to prevent the local market from becoming oversupplied by moderating our production rates in light of our reduced export options.”