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Europe PVC prices lag behind global markets, upward pressure mounts

by Başak Ceylan -
by Esra Ersöz -
  • 22/09/2020 (09:51)
Global PVC markets have been pressured upwards with supply issues, particularly for the past two months. Although the prolonged tightness has also helped keep prices elevated in Europe’s local markets, this has sparked more considerable price hikes in other global markets, relative to Europe.

Increases in Europe pale in comparison with other major markets

At a glance, spot PVC markets in Italy and Northwest Europe show a solid recovery from late May, when prices hit a bottom. However, a closer inspection reveals that this cumulative increase pales in comparison with the other global markets.

China’s import PVC market has increased by 56% since bottoming out in early May. During the same timeframe, India’s import market showed a similar increase of 64%. The Turkish market, the largest PVC export destination for Europe, saw a 91% surge in import prices of non-dutiable origins, largely European origins, from the bottom reached in early May.

Delta between Europe’s local prices and export prices to Turkey at its widest

The contrast is more pronounced when the gap with non-dutiable import prices in Turkey are analysed. According to ChemOrbis Price Index, the US dollar equivalence of average local PVC price in Northwest Europe is more than $200/ton lower than the import price offered to Turkey on CIF basis for duty-free origins, namely Europeans.

Although Europe’s local prices should carry a premium over the import market in Turkey under balanced market conditions, Turkey climbed notably above Europe and the gap widened to its highest on record last week as a result of the smaller pace of increases in European prices.

What has kept hikes in check in Europe?

Supply-demand dynamics are largely cited as key factors behind this relatively limited increase in local PVC prices in Europe. Although European PVC markets have somewhat found a boost from reduced supply availability, demand has remained depressed by the pandemic. Already enjoying healthy netbacks in export destinations, European PVC suppliers have not reflected hefty increases on their local pricing so far.

Gains expected to continue into October

Most players expect further upside in prices as the tightness in supplies is expected to continue well into October, with a number of planned and unplanned shutdowns. The improvement in demand has also increased the upward pressures on prices. A source at a major producer argued that they are already receiving lots of early inquiries for October while they are craving to offer some.

Considering this wide disparity between Europe’s local markets and other major destinations, sellers feel another round of hikes will be low-hanging fruits next month on their way to recover margins. “The lack of materials might be more striking in October,” a producer source said, highlighting a jump in demand from irregular sources. “The main price driver in October is more likely to be the supply-demand dynamics, rather than the ethylene contract pass-through,” another source forecast.
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