European PVC buyers resist initial hike attempts for September

Regional PVC markets opened September on a bullish note, with initial offers emerging with hikes of up to €50/ton amid margin recovery targets. Still, lower ethylene settlement, balanced supply conditions and cautious buyer sentiment have led to protracted discussions despite a generally positive outlook.

Producers strive to recoup margins

This has been the third straight month of modest price increases amid low producer margins. Despite €25/ton lower ethylene settlement, PVC producers approached the market with visible hike requests to boost their margins.

Suppliers have been seeking hikes since July regardless of the ethylene outcome, which pulled prices from multi-year lows in early Q3, as can be seen on the graph below.



Buyers reluctant to pay initial hikes

A tug of war between sellers and buyers continues. Although sellers stand firm on their initial September offers, buyers are holding off purchases. Hence, price hikes larger than €30/ton have yet to see acceptance. Some sellers have already stepped back from their initial hike requests and initial deals started to be reported with hikes of €10-30/ton, and occasionally rollovers.

So far, producers have been facing a low order entry considering the waiting stance among buyers, who point to the weak consumption of finished goods and the unpromising demand outlook for the short and medium term. Transaction volumes may remain limited if sellers stick to their initial hike attempts.

Several buyers commented, “There is no room for such large hikes this month. We are skeptical about an upturn unless demand improves.”

Supply balance remains intact

PVC availability has remained comfortable despite a notable reduction in imports and regional turnarounds. A lack of brisk sales and unfavorable conditions in the export markets may have also contributed to this balance, keeping inventory levels healthy within the region.

European PVC producers had previously sold substantial volumes to Türkiye and India during June-August period. However, they have recently curtailed exports to these outlets due to poor netbacks. Confirming the recent decision, a producer source stated, “We are not planning to boost exports unless netbacks improve in our key outlets. Our current focus will be on the local market given the lack of significant import competition.”

The outlook appears firmer

A reversal in the coming months seems unlikely in the regional PVC markets, considering the ripple effects from provisional anti-dumping duties on US and Egyptian S-PVC. Import availability is expected to decline further, providing regional producers with the leverage to recoup their margins.

The October outlook is cautiously optimistic, with producers’ intention of pushing their margins back to the break-even levels or positive territory. As they are grappling with tight margins considering disadvantageous production costs in Europe, they will seek further hikes to offset financial pressures.

A few suppliers expect an improvement in sales volumes in October-November, when buyers may need to secure their needs from the local market amid curbed import flow and lower regional supply. Indeed, the anticipated post-summer restocking activity did not materialize in September. The resurgence of demand is crucial for driving margin recovery. Hence, eyes are locked on the contract negotiations that will kick off by the end of 2024.

Achieving substantial hikes may be challenging, while they concurred that the size of potential hikes will depend on demand recovery and sales results during September. A producer source said, “We aim to bring PVC prices to the profitable levels again.”