Bullish run for PVC enters 8th month in Europe

European PVC markets sustained uptrend for the eighth month in a row in January. Offers that have been announced so far indicated larger hikes when compared to December in response to the monthly ethylene hike of €65/ton.

A few producers seem to have followed the half of the ethylene hike for January, while other producers asked for larger increases of €50-75/ton or even €100/ton. To be more precise, initial PVC offers have been revealed with increases surpassing the half of the ethylene hike in most cases.

Increases beyond the half of the ethylene hike have also been sought as suppliers ask for margin expansion, pointing to the low caustic soda prices. A producer source in the region said, “The ongoing downtrend in caustic prices prompted us to seek larger increases.”

Buyers’ reaction to these hikes has not been evaluated broadly amid new lockdown measures and lingering holiday lull. There are some buyers who find absorbability of larger hikes possible.

Surging freight rates, long-lead times and 25% tariffs on US PVC are likely to keep imports restricted until later Q1. Several players think that higher export prices from the US and the additional tariffs will deter European buyers from engaging in import material. Some sources reported that Mexican PVC imports may also be diverted to Brazil, where prices are well above European levels.

Meanwhile, regional supply levels are expected to find some relief after Shin Etsu and Inovyn lifted their force majeures. Kem One’s force majeure was still in place at the time of writing, as a side note.

Nevertheless, stock levels inside Europe are reported to remain restricted, with some buyers reporting that they still have no access to extra quantities.

A source from a regional producer said, “We need to increase our stock levels to be prepared for the maintenance shutdown. Our current stock levels are not sufficient to cover requirements for one month. Cracker maintenances may also provide support for the PVC market.”

Demand was surprisingly good in November and December, while projections for January demand are also optimistic. However, buyers may grow more cautious with their purchases considering the new highs PVC prices touched after several months of hikes.