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Chinese oversupply dampens Asian PVC markets

by Shibu Itty Kuttickal - sikuttickal@chemorbis.com
  • 11/05/2022 (03:01)
A surfeit of PVC stocks in China, as a result of the slow domestic offtakes amid ongoing pandemic restrictions, has continued to cast a bearish pall on Asian PVC markets.

With a week ahead of a major Taiwanese producer’s possible release of offers of its PVC June allocations to Asian buyers, players expect the supplier to reduce its offers by at least $100/ton from its May shipment prices.

The Taiwanese producer had reduced May import offers to Asian markets by $50-80/ton, in larger-than-expected decreases after two straight months of hikes. Its PVC K67-68 offers for May were $80/ton lower at $1560/ton CIF India, with no volume discounts offered, while export offers came in lower by $50/ton at $1300/ton FOB Taiwan.

Buyers sitting tight in India

Market players in India, the world’s largest PVC importer, were markedly downbeat in their outlook. “We are currently seeing offers only from China as producers in Japan, South Korea and Taiwan are all waiting for a major Taiwanese producer to issue its June offers, which are expected next week,” said a Mumbai-based trader.

“We expect the major supplier to reduce its CIF offers by at least $100/ton. But we don’t see buyers currently even at those levels as Chinese ethylene-based shipments are being offered at the low-$1400s/ton CIF India and acetylene-based shipments at the mid-to-high-$1300s/ton,” the trader added.

Indian buyers were in fact sitting tight as there are no indications of the Chinese government easing its clampdown on movements to combat the COVID virus. “Many see prices continuing to slide from the current levels. And, the monsoon is just a month away. It’s definitely not the time to spend on PVC,” a Delhi-based trader said.

Chinese sellers remain focused on export markets

Chinese sellers are also not exuding confidence on the local markets, and most have been focusing on exports since March. “Inventory levels are steadily building up,” said a source at a Chinese producer.

“Downstream demand has slumped due to reduced factory production. Additionally, we expect the Taiwanese producer to likely cut June offers next week, with market players expecting a $100/ton reduction. We remain focused on exports, especially to India, and have kept cutting export offers to stay competitive,” said an official at another producer.

“Some downstream factories have been closed due to shortage of labour as a result of the pandemic and a power crunch,” said a source at yet another Chinese producer..

SEA buyers holding out for prices to fall further

Meanwhile in Southeast Asia, weakening demand and the fall in naphtha and C2 prices have resulted in domestic PVC offers being cut. “Domestic demand has been low as PVC and other key commodity prices have risen too sharply in the first quarter. Downstream demand has not recovered to meet the rapid and sharp feedstock hikes,” an Indonesian converter pointed out.

“Buyers will likely hold out for lower prices before stepping back into the spot market,” said a Philippine converter.

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