Supply constraints keep PVC market firm in Asia

31-Aug-12

Import PVC offers to China have been steadily firming up since the beginning of July, as per ChemOrbis. With September business being concluded higher these days, players believe that further firming is on the horizon. Apart from higher ethylene costs, supply constraints in Asia are also playing a major role in the recent bullish expectations even though demand is not satisfying across China amidst the government’s efforts to cool down the country’s property market. According to ChemOrbis Production News, numerous plants are undergoing shutdowns or have lowered operating rates in Far East Asia both for VCM and PVC. Tosoh, one of the major global VCM suppliers, has still not resumed operations at its No 2 VCM unit with a capacity of 550,000 tpa in Japan since a fire broke out in November last year. Soon, the company is also planning to shut down its 400,000 tpa No 3 VCM unit on September 1 for 40 days of maintenance. Meanwhile, Formosa started a maintenance shutdown at its 900,000 tpa VCM unit in Taiwan on August 15, which is scheduled to last for a month. Taiwan’s VCM Corporation was also planning to shut its 382,000 tpa VCM unit for two weeks at the end of August.Once the operations are resumed at these VCM units, there are more plants that are slated to go offline as Japan’s Tosoh and Tokuyama along with South Korea’s Hanwha are planning to go for new maintenance shutdowns in the October to November period. In the PVC market, Formosa, a major Taiwanese supplier, is running most of its PVC units at reduced rates of 80-85% while the producer shut its 420,000 tpa PVC unit in Mai Liao a week ago. The company was expecting to keep it down for a week and start running at reduced rates of 70% until their VCM unit restarts. Japan’s Taiyo Vinyl also idled its 90,000 tpa PVC unit in Chiba on August 22 for a month. These developments are helping prices retain their strength, as per ChemOrbis. A Shanghai based trader withdrew his offer for Thai PVC after having concluded some deals with $10-30/ton increases over last week. “We withdrew for now because we believe that prices will continue to move higher in the near term,” he commented. A source from a major Taiwanese producer also commented, “Demand is not brilliant and buyers are finding the current market level high in China. However, we managed to close our September business with $70-80/ton increases over August at our initial offer levels in a week’s time.”