China’s local PVC prices near historic-lows, exports see further drops

While import PVC prices in China have hovered around their nine-month highs since late June, local and export markets are telling a different story, featuring a persistent downhill movement. Indeed, prices for local and exported PVC grades have moved south for the past 6-7 weeks, with local markets nearing their record lows.

Acetylene-based K67 at its lowest level since 2016, C2-based hits its lowest level since 2008

As for the current week, domestic prices were assessed CNY100-150/ton ($14-21/ton) lower from a week earlier at CNY5500-6000/ton ($671-732/ton without VAT) for ethylene-based K67 and CNY100-200/ton ($14-28/ton) lower at CNY5400-5700/ton ($659-796/ton without VAT) for acetylene-based K67, both on an ex-warehouse, cash, including VAT basis. Both grades posted a cumulative decrease of around 7.5% over the past seven weeks.

Data obtained from ChemOrbis Price Index illustrates that the weekly average price of ethylene-based PVC hit its lowest point since mid-November 2008, which was the all-time low level in ChemOrbis price history.

Meanwhile, acetylene-based PVC is currently at its eight-and-a-half-year low. In other words, it has reached its lowest level since February 2016, when the weekly average of price index saw the record lows, unlike ethylene-based PVC whose record-low level was seen in 2008. That is to say, both products are currently trading near their all-time lows.



Disparity between import and local PVC market also grows

As a result of the divergent price trends in the local and import markets, the gap appears to have widened to an unusual level, after VAT is deducted from local prices and they are converted to the US dollar in a bid to compare them with imports on CIF basis without any duties included.

With the latest decreases in the local market, the delta between ethylene-based PVC prices and imports expands to $115/ton after moving above the $100/ton threshold three weeks ago, according to ChemOrbis data. Historically, there are rare moments when the gap between the two markets grows this much, although China is not a big importer of PVC, rather it’s one of the major exporters.

Export markets on 6-week downtrend

Asian PVC players are waiting for a major Taiwanese producer’s August contract offers, which have been widely expected to come out with rollovers soon. Normally, most suppliers stay on hold to look for cues from the benchmark offers, but this is not the case for Chinese exporters this week, with most of them issuing downward adjustments.

The current PVC prices on a FOB China basis are $10-15/ton lower from the previous week, to be assessed at $710-760/ton for ethylene-based K67. Meanwhile, export prices of acetylene-based K67 see larger weekly decreases of $10-30/ton, to be assessed at $705-730/ton on the same terms. This indicates six straight weeks of a downtrend in China’s export markets.

Weak supply-demand dynamics in the center stage

Despite a robust trading atmosphere outside the country, sentiment among Chinese players has remained weak due to stagnant demand during a seasonal lull and ample supplies.

Buying interest has been persistently unhealthy amid the off-season, with reduced run rates at downstream factories leading to a limited number of essential PVC purchases. Players also point to the poor real estate industry as a culprit behind sluggish demand. “The weak property sector is the major issue causing a demand slowdown,” said a trader based in Longkou.

Since India, China’s key export destination, has entered a typical monsoon season, demand is subdued. Meanwhile, escalated freight rates, disregarding the recent ease, and a lack of container space have still made FOB offers less attractive. This hinders export activities and pressures domestic supply at the same time.

Operating rates are rising given the end of maintenance shutdowns at some plants, and inventories are ample. Notably, the availability of acetylene-based K67 is reportedly much higher when compared to the ethylene-based grade. A trader noted, “Local PVC inventories stand at approximately 850,000 tons, primarily comprising acetylene-based PVC, with ethylene-based PVC inventories anticipated at around 300,000 tons.”

Falling futures, exchange rates add to domestic weakness

Contributing to unsupportive supply-demand conditions is the ongoing downswing in futures markets, further weighing down sentiment in the spot markets. September PVC futures on the Dalian Commodity Exchange posted additional weekly losses of CNY51/ton ($7/ton) as of July 17. The lingering depreciation of the yuan against the US dollar also resulted in lower domestic prices in USD.

In the meantime, the bearishness inside China has a spillover impact on exports, prompting some suppliers to issue lower pricing. Sources at two producers opined, “Domestic PVC prices have dropped due to falling futures and faltering demand. We also adjust our FOB offers downwards due to the decline in domestic markets.”