China’s local PVC markets continue downtrend, trading $100 below imports

China’s local PVC markets closed June on a four-week downtrend, primarily due to unsupportive supply-demand fundamentals at home. Data obtained from ChemOrbis Price Index show that the weekly average levels in USD of local prices have declined by 5% over the past four weeks. Additionally, the local ethylene-based K67 market is currently hovering around $100/ton below CIF offers.

As for the week ending on June 28, domestic PVC prices were assessed stable to CNY200/ton ($28/ton) lower weekly at CNY5600-6150/ton ($683-750/ton without VAT) for ethylene-based PVC and CNY5500-5900/ton ($670-719/ton without VAT) for acetylene-based K67, all on an ex-warehouse, cash, including VAT basis.

Local prices still diverge from the dominant trend in Asia

The ocean shipping crisis and strong freight rates have continued to underpin PVC K67 prices across the key Asian markets. Import prices mainly moved sideways after a major Taiwanese producer announced a hefty increase of $150/ton for India and a smaller hike of $25/ton for Southeast Asia on its July contract offers. Meanwhile, local prices in these markets experienced rollovers or additional increases, influenced by the spill-over effects of high import offers

In China, these same factors hampered export activities and, in turn, increased availability in the domestic markets. Poor demand, combined with falling futures prices, added to the bearish pressure within the country.

Suppliers struggle with poor demand

The demand side has stayed in a weakness amid the off-season. “Domestic demand is in a seasonal lull, with only a limited number of essential purchases. Given the absence of a demand recovery, market fundamentals remain weak,” noted a Chinese trader.

Chinese PVC buyers not only maintained small purchases for basic needs but also favored sourcing low-priced PVC polymers, according to market sources. This preference has created a more challenging sales environment, leading sellers to further decrease prices.

In the meantime, the real estate sector, a key consumer of PVC, has not recovered since the announcement of strong macroeconomic policies. A producer’s source reported, “Even though the Chinese government has announced strong property measures aimed at reviving the construction industry, PVC demand is still not buoyant since it takes more time for macroeconomic measures to influence downstream industries and demand.”

Ample supply exerts additional pressure

PVC sellers’ pricing was also undermined by an excess of supply at home. According to market players, domestic inventory of PVC was increasing due to limited maintenance schedules, which led to higher operating rates.

Contributing to a rise in availability at home was the inability to export materials, with a source at a Tanshan-based producer saying, “The market inventory is high as sellers have failed to divert cargoes to other outlets amid shipping chaos.” Indeed, Chinese exporters continued to face shipping challenges since surging freight rates were dimming export demand and a lack of containers was squeezing spaces to load cargoes.

“Imagine freight rates soaring three to four times higher than they were in mid-to-late April. As a result, import offers from China have significantly decreased because closing CIF deals has become challenging. Chinese exporters continue to offer on an FOB basis, but few buyers are willing to take the risk due to the ongoing shortage of container space,” explained a trader based in Mumbai.

Local ethylene-based K67 trades $100 below imports

Data from ChemOrbis Price Index also showed that the weekly average price of ethylene-based PVC K67 on ex-warehouse China, cash excluding VAT basis was quoted around $100/ton below the import market. The last time CIF prices traded $100/ton or more above the local market was in May 2022.

The premium that CIF K67 prices carry over local prices has increased significantly, quadrupling over the past four weeks.