Asian PVC markets at a standstill; will Indian budget provide a turning point?

The Chinese New Year holidays have kept most Asian markets inactive and mostly stable, but some players are expecting a better sentiment in the market after the holidays, especially after India’s budget for 2025-’26, which is expected to give a fillip to infrastructure projects.

This may mean a lift to the PVC markets although it was not clear when the likely upturn could happen. This also meant market players were keeping away from providing their views on what they expected from a major Taiwanese producer when it announces benchmark Asian prices for March.

Budget increase may encompass infrastructure, real-estate, agriculture and irrigation

Apart from a likely increase in the budget outlay for infrastructure and the real-estate sector, the market expects the PVC trade to receive a boost from innovative budget funding initiatives for agriculture and irrigation.

“Last year we saw an interim budget after the parliament elections that raised the infrastructure outlay, but we believe a lot of the allotments was left unspent. But this year, a full budget will be presented which market participants believe will spur higher infrastructure investments," said a trader in Mumbai.

PVC demand to be buoyed

This could provide a boost to most of the Asian PVC markets as India is the world’s largest buyer of the polymer. CIF India prices have so far shed 22% from peak reached in end June 2024 despite minor upturns along the way, while Southeast Asian and Chinese import prices have fallen by 15-17% during the same period, ChemOrbis PriceWizard shows. The latest week has seen the markets mostly at a standstill, as a result of the Chinese New Year holidays.

Yet, demand boost may not come right away

But others were skeptical of the budget on its own providing a boost to the PVC market. “The whole market seems to be waiting for the national budget. But the question is: Will the budget be enough to rejuvenate the Indian market. Buyers are not too enthusiastic as they still wait for word from the government on the anti-dumping duties on import PVC. Most players expect the market outlay for infrastructure in the upcoming budget to be higher than the INR11.11 trillion set apart for the previous year.

Most of the funds allotted in the budget for 2024-’25 are believed to have been unspent, which also pointed to a higher outlay for 2025-’26,” another Mumbai-based trader added. “This is good for the PVC markets for sure, but the jury is still out on whether the impact on the market could be felt sooner. It could take more time before the tenders for the projects come out and demand for PVC makes a solid return,” he added.

ADD conundrum casts pall on demand outlook for PVC

The return of Donald J Trump to power in the United States has brought fears of retaliatory tariffs being imposed on Indian and Chinese products. Some players think this could have led the government to relegate the ADD agenda to the backburner for now. “The provisional ADDs were notified by the government in early November but we have still not heard the last word yet on the duties. Is there a re-think on this matter, at least perhaps a reassessment of the ADDs for US companies, which have seen a maximum ADD of $339/ton. We are still waiting for government advice,” the trader said.

Post-Lunar Year holiday expectations vary

Meanwhile, before the holidays began, Chinese traders did not expect any big change in the market going forward in the near term. “The trend is mostly stable. Many downstream players started their holidays early and after the holidays we may see inventories increasing. We expect prices to remain flat in the near term,” said a PVC trader in China. A major producer in China said the market outlook remained bearish with demand remaining low. “Operating rates at downstream factories are challenged due to higher ADDs on Chinese PVC proposed in India. We’re currently offering at $740-750/ton CIF India, with our export offers reduced to $640-650/ton FOB China,” a source at the producer said.

In Southeast Asia, some traders hoped for better prices to prevail after the holidays. “Some sellers did raise prices before the holidays, pointing to higher futures prices in China. We feel prices could rise after the Chinese New Year week, because of a better sentiment in India as well as the US. Freight costs from the US could also increase after the CNY and could pull up US offers. We’ve also heard US demand rising after the California fires. European demand has also improved lately,” a Vietnamese trader said.

But a converter in Vietnam said he tended to keep inventories at a low level. “We bought some for the post-holiday period. We think the market is likely to be slow even after the holidays and don’t see the need to build up stocks,” he added.