Bullish freight rates likely to keep Asian PVC prices firm in near term

The latest week has seen a deadlock between Asian PVC buyers and sellers, but few expect prices to slide in the near term as freight rates to major import markets from northeast Asia have stayed strong, and shipping analysts predict them to remain high through the year.

“The freight rates have made it difficult to strike deals for import shipments,” said a trader based in Mumbai, the commercial hub of India, which is the world’s largest PVC buyer. “Imagine freight rates jumping three to four times from what they were in mid-to-end April. This has resulted in import offers from China drying up as it was difficult to seal CIF deals. Exporters from China have kept offering on FOB basis, but there have been few buyers willing to take that bait, knowing well the ongoing container space squeeze,” he added.

Asian prices rise by 7-23% in two months

ChemOrbis Price Index shows PVC import prices into India jumping by about 23% in the last eight weeks to a one-and-a-half year high, or the highest since February 2023, while Southeast Asian prices have risen by about 11% over the same period to a 10-month high. Chinese prices, as of the week ending June 22, have risen by about 7% to a 9-month high.



While demand has slightly risen in India, the sharp increase in prices has mostly been attributed to the sharp rise in freight rates. “We haven’t seen a great strengthening in PVC end-user demand, but traders are buying for stockpiling, expecting prices to rise ahead. They see freights continuing to rise at least for the next four months, although most expectations were for shippers to keep rates firm for most of the current year,” another trader in Mumbai added.

Monsoon lull may not last too long this time round

According to him, the new government in India is likely to keep boosting infrastructure spending, which could be a positive factor for the PVC markets. At the same time, it is the monsoon season currently in India, when demand is typically weak as construction activity grinds to a halt and demand for irrigation pipes are also at a low key.

Traders, however, see post-monsoon demand kicking in earlier than usual in India. “We expect demand for PVC requirements after the rainy season to begin, making its presence felt by mid-July. This could keep prices firm in July as well,” a trader added.

Freight rally may continue through early 2025

Meanwhile, analysts have pointed to the likelihood of freight rates staying high at least till October, although there were also predictions of rates staying strong till the Chinese New Year in February 2025. Freight rates are now mostly quoted above the $150/ton mark for the China/India route. The rise in freight rates by about three times or more in the last three months has raised import K67 prices to more than $950/ton CIF India.

“There seems to be no letup yet on the freight rally, but demand is not out of the dumps yet. People are buying mostly because they think the freight rates will remain high at least for the near term, although we hear the shipping levels may stay high at least for the rest of the year,” a major Singapore-based trader said. “There may not be a major bull run happening, but we expect PVC prices to stay firm for some time,” he added.

In Southeast Asia too, players may start replenishing for the post-monsoon demand as prices keep rising. The Taiwanese price hikes are also thought to have brought some buyers back to the market, with some pent-up demand likely. However, supply pressure remains in the region, which would temper any runaway increase in prices.

Freight rally pressures Chinese exporters

At the same time, inventories in the China market remained high. “Higher freight costs and container shortages have made it extremely difficult for exporting Chinese PVC,” said a source at a producer in China. “Buyers will only choose to purchase lower-priced PVC because demand remains weak. They keep buying for immediate and basic requirements only and are unlikely to buy for stockpiling. The weak real-estate markets have also hit PVC markets in China,” he added. As export shipments kept being redirected to the local market, inventories have started piling up home, traders in China have said.

The container space squeeze has spread to other parts of northeast Asia too, with a major South Korean supplier raising prices by $100/ton, while the Taiwanese major expressed inability to ship any cargoes additional to whatever it had allocated earlier.