Tight supply in domestic markets of China keeps PVC outlook firm in Asia

Spot PVC prices in Asia have continued to move higher over the past few weeks in defiance of players’ earlier expectations that prices would be weighed down by reduced consumption in the region owing to multiple holidays in both China and Southeast Asia, as per Chemorbis. Tight supply in China is said to be the main factor keeping prices firm, as lower operating rates on the part of PVC producers in China has resulted in larger import purchases from Chinese buyers this month as rapidly rising domestic PVC prices in the Chinese market have encouraged sellers elsewhere in the region to take a firm stance on prices. Ethylene and acetylene based PVC producers inside China report that they are currently operating plants at reduced rates of around 40-70% mainly due to electricity usage limitations imposed by the government. Plants producing carbide feedstock have also cut back operating rates, driving carbide prices higher and raising production costs for PVC producers. Reduced operating rates along with higher costs and steady demand have led to dramatic monthly increases in domestic PVC prices. When compared with the first week of September, offers for acetylene-based PVC have risen by CNY500-700/ton (US$74-104/ton) while offers for ethylene-based PVC have gained CNY400-450/ton (US$59-67/ton). In China’s import market, buyers have shown an increased appetite for import cargoes this month owing to restricted availability of domestic material as well as rapidly rising domestic prices. Mainstream Asian PVC producers report that they have already sold most of their October allocations to China at prices at or close to their initial October offer levels, which were announced with increases of US$30/ton from the September done deal level. Although the upcoming National Day holidays will keep most converters out of the market for an entire week in October, sellers predict that PVC prices will remain firm over the coming month due to greater demand for import materials. In Southeast Asia, most sellers comment that they have been disappointed with their September sales. A producer in Vietnam elected to divert some September allocation to the export market as demand from the local market was poor, while a Thai producer who announced October offers to the regional market last week complained of very little buying interest so far. A number of converters in the region say that they have decided to delay their purchases to next month, in anticipation of more attractive offers in October. However, sellers counter that they cannot agree to any reductions on their offer levels if prices continue to rise in the Chinese market. An Indonesian producer stated that they are planning to raise domestic offers by US$30-40/ton next month owing to firmer prices in China as well as higher upstream costs, despite their current offer levels have met with poor response from buyers.