Europe’s PVC markets quiet, poised for a firmer trend in February

Regional PVC markets have been rangebound as producers focused on maintaining stable prices, despite the pressure to improve their margins. However, as January draws to a close, the PVC market is signalling a potential shift toward firmer pricing in February. Although the cost-push will likely be there, the lingering supply-demand imbalance will be a factor to watch as it could temper the extent of increases.

Producers maintain prices in Jan after year-end discounts

Participants both in the spot and contract markets witnessed sluggish buying interest for fresh cargos in early January. This was due in part to the earlier restocking period, when converters could obtain discounts on the starting levels of 2025 contracts. Although the amount of these discounts was modest, the influence was rigid given the fact that spot PVC prices are generally below the €1000/ton FD Italy and €900/ton FD NWE threshold.

Hence, producers kept their prices flat in line with the ethylene’s stability this month, aiming to preserve their margins. Although sellers strive to boost their margins to bring PVC production back to the profitable levels amid rising electricity and gas costs, unsupportive demand conditions prevented them from doing so.

February signals hike attempts in sync with C2

A key driver factor fuelling more optimistic projections for February has been the expected hike in the next ethylene settlement. Players expect this to give sellers the leverage needed to raise PVC prices following two months of minimal price movement at low levels. They also expect more limited import flow following the definitive anti-dumping duties on S-PVC imports from Egypt and US that started to be imposed as of January 10, 2025.

Looking ahead, the market is bracing for a potential uptick in prices, driven by a combination of rising monomer costs and increasing energy prices. With the expected €30-50/ton increase in ethylene contracts for February, producers are likely to request higher prices aligned with or even beyond the full monomer rise to recoup some of their margin losses, after a period of low profitability. However, if these efforts will prove workable hinges on the responsiveness of demand.

The challenge ahead: The ongoing supply-demand conundrum

Still, there are several factors contributing to a cautious sentiment. Demand remained sluggish, with many converters grappling with poor orders. Expectations of stronger purchasing activity failed to materialize, with consumption remaining in line with late 2024 levels. In some cases, purchases were driven more by necessity than a surge in demand, as stock levels were already low heading into the new year.

On the supply front, monthly allocations were reduced due to maintenance shutdowns. Some distributors in Italy reported slightly firmer prices from December, driven by more restricted allocations rather than robust demand. Meanwhile, Spolana’s permanent closure did not cause any jitters in the market. Despite these production hiccups, demand has been insufficient to absorb available volumes. This was a result of weak consumption in key end-product markets, including construction, automotive and packaging.

Hence, achieving PVC hikes on par with those of ethylene may be difficult as early as February, unless demand shows a significant sign of recovery or stronger drivers emerge. Even though prices reverse direction, hikes may be moderate, with buyers pushing back and negotiating for increases closer to the half of the anticipated monomer hike.

What does the supply outlook indicate?

Since a key theme for the European PVC market remains the ongoing supply-demand imbalance, players are assessing the impact of the anti-dumping duties on US and Egyptian S-PVC. Regional supply management efforts and restrictive trade barriers will keep supplies from growing rapidly.

High anti-dumping duties applied to PVC from the US and Egypt will have a significant impact on the feasibility of importing materials from these regions, which are effectively shutting down the possibility of profitable arbitrage opportunities. Even if FAS Houston prices stand at lower levels than Europe, the duties are steep enough to make these imports economically unviable.

Players are considering alternatives, including Asian and Mexican PVC, depending on the continued decline in freight rates. The potential window for importing from Asia may open particularly if India introduces antidumping duties on PVC imports from several regions. With freight rates easing amid potentially smoother Suez transits, Asian suppliers could become more competitive, especially if European prices continue to rise. If the gap between European and Asian PVC markets widens, it would incentivize imports from Asia. Not only would it be a more cost-effective solution for European buyers, but it could also lead to greater volumes of Asian PVC entering the European market.

Even though imports remain limited, this is unlikely to drive a significant supply crunch in the short term, as domestic production can largely meet demand. While suppliers pin their hopes on recouping some margin losses thanks to the reduced import flow, there is no clear sign that demand will improve in a meaningful way to support sustained price hikes given the broader economic environment.