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Asian PVC markets baffled by mega monthly offer hike

by Abdul Hadhi -
  • 16/03/2021 (03:45)
PVC markets in Asia were taken by surprise by a sharp increase in monthly offers for April by a major Taiwanese producer.

The producer, which often sets the tone for the market - raised offers for the 11th month in a row for April - this time by $300/ton from March.

Despite offers standing at record highs of $1640/ton CIF India, $1510/ton CIF China, and $1460/ton FOB Taiwan, the supplier was sold out shortly after the announcement, according to traders. The producer’s April allocation was limited, meanwhile.

Last week, import PVC K67 spot prices stood at $1605/ton CIF India and $1450/ton CIF China, which were already the highest since ChemOrbis started compiling such data from 2008.

Tight supply, stronger demand drive prices

The higher offers have been driven by tight supply due to turnarounds.

FPC is conducting 3-week turnarounds of a 590,000 tons/year plant in March and a 450,000 tons/year plant in April - both in Taiwan. Meanwhile, LG Chem has scheduled maintenance 280,000 tons/year in South Korea in April, while Reliance plans to shut its 350,000 tons/year Hazira unit in India for two weeks in March.

Meanwhile, deep-sea cargoes continue to be scarce, especially with plants shut during the snow spell in the US Gulf yet to return to normal production. Among the operators who had shut their plants during the wintry weather were Formosa Plastics and Westlake Chemicals.

US material may not reach Asian markets for most of the first half of this year, according to some market estimates.

The tight supply is going against increasing demand in the region.

In India, PVC requirements are robust due to summer agriculture demand and construction projects ahead of the monsoon season, which starts in June. Demand has also been increasing in China, where warmer weather after winter has ushered in more construction activity.

Still, some buying resistance expected

While the Taiwanese major’s allocations have been sold out, some end-product manufacturers do not seem enthusiastic.

“Futures prices rose sharply, and spot offers have moved up as well. PVC sellers are firm on their offers. However, downstream buyers prefer to remain on the sidelines, and the acceptance of the current market offer is low. We expect prices to move sideways after today’s sharp increase,” a China-based trader said.

PVC futures on the Dalian Commodity Exchange rose $60/ton on Monday after gaining $25/ton on Friday.

Meanwhile, in Vietnam, a source at a local producer said, “We are surprised by the announcement. It is just too high to accept. Converters are stuck now, and if they buy, they produce at a loss. But if they don’t buy, they won’t have material to produce, and the factory must stop operations which will also lead to a loss.”

“Now is the dry season, and demand will be good, but because of high prices, many converters have reduced their production rate while waiting for prices to pull back. Many of their buyers also can’t accept prices rising so much, and they, too, reduce their orders,” he added.

Amid the high prices, buyers have started to consider alternatives to PVC pipes such as HDPE pipes.
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