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Bullish run for PVC enters 6th month in Turkey: Supply relief under question

by Merve Madakbaşı -
  • 06/11/2020 (04:04)
Turkish PVC players have witnessed the longest rising streak since ChemOrbis started to compile data in 2008. November indicated a new series of hikes on the heels of supply constraints. Yet, an imbalance with other markets blurs outlook on the longer run.

· Some European sellers resumed offering cargos

· Yet, allocations remained quite limited

· Market is stuck between buyers’ resistance and global firmness

Import market skyrocketed by 108% since May on severe tightness

The cumulative increases have neared $700/ton (108%) since the uptrend started around mid-May, according to the weekly average data from ChemOrbis. European K67 prices have soared $685/ton in total, while the dutiable market has spiked $665/ton up until today.

In fact, import PVC K67 prices even headed for $1350/ton CFR Turkey threshold in a few cases this week despite the off-season round the corner.

The local PVC market followed suit since waning prompt supplies amid buoyant demand over the last few months prompted consecutive hike decisions from the domestic producer, Petkim . The company applied another $30/ton increase on its list prices in early November. The distribution channel climbed 75% in May-October this year, consequently.

Turkey carries over $200/ton premium over Europe

The non-dutiable K67 has been trading above Europe’s local market since around mid-August, with Turkey’s premium over the latter steadily widening. The scene remains valid even after sellers tried to reduce the gap between their local and export prices with €50-80/ton ($59-94/ton with the recent parity) increases in their own region.

According to the graph obtained from ChemOrbis Price Wizard below, prices continued to stand $212/ton above Italy’s local market, defying the traditional discount they are supposed to carry.

Manufacturers are suffering from unaffordable costs

PVC buyers lamented about massive hikes in PVC resin prices, saying, “The persistently depreciating Turkish lira against its peers already pushed our costs notably up. We can hardly reflect PVC hikes onto our end product prices amid a tough competition in business. Turkey is more expensive than elsewhere.”

The USD/Lira parity has recently hovered an all-time high of 8.50, adding to the rising costs of polymer players in Turkey. Buyers who mostly serve the local market were affected in particular.

European PVC started to re-emerge albeit for small volumes

Turkey had faced largely reduced export volumes out of Europe and the US since the third quarter of 2020. Production was hit by the COVID-19 outbreak and harsh weather conditions which led to force majeure declarations in both regions.

Meanwhile, players reported relatively more offers from West and South European producers this month led by restarts at several plants both in Europe and the US. Still, traders reported that volumes were quite limited to 100-200 tons in most cases.

“A West European producer revealed $60/ton hikes for November despite the steady outcome of ethylene settlement. Players mostly blamed healthy demand inside the region as well as the fact that PVC makers may need longer time to resume normal operations amid renewed lockdowns,” opined a participant.

“We were able to secure 200 tons of South European K67 at $1340/ton CIF Turkey. Our supplier told us that they have no additional cargos for Turkey for the time being,” a manufacturer reported to ChemOrbis.

Players approach distant cargos cautiously

The inflated price levels continue to keep Turkish players on edge while both traders and buyers are shying away from distant cargos. A large trader commented, “We find January arrival cargos quite risky under these circumstances. Once supply eases further, the market may face downward corrections after seeing almost a decade high.”

Buyers opined, “American K67 prices came as high as $1300/ton and above as supply has not been fully restored following back-to-back hurricanes. However, interest appears thin towards these cargos as they may be expensive upon their arrival. Although inadequate supplies keep the global trend strong for now, PVC can’t absorb further gains.”
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