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European PVC hovers around 4-year-lows, is reversal near?

by Manolya Tufan -
  • 23/12/2019 (04:25)
December PVC deals were closed with rollovers in Europe. Only slightly higher ethylene contracts appear to have failed to move PVC up but helped it stabilize around 4-year lows. Players’ focus has now shifted to January, with the question as to whether or not prices will see a rebound.

PVC stabilizes at 4-year low in Dec

According to ChemOrbis Price Index, the weekly average of spot PVC prices stabilized at nearly 4-year low after initial December hikes proved unworkable. In Italy, all PVC grades stand at their lowest levels since March 2016. In Northwest Europe, meanwhile, prices are at their lowest levels since December 2016 for K67-68 and April 2016 for other grades.

Data also show that spot PVC prices both in Italy and Northwest Europe were on a downward trajectory since May-June, disregarding some short-lived rebounds.

C2 expectations offer a mixed bag

Expectations for the next ethylene settlement are divergent amid opposing factors. According to players, the monthly monomer settlement might come with rollovers to small variations.
The spot monomer market is torn between rising costs and cautious demand amid more-than-comfortable supplies.

Some players expect a softer outcome, looking at weak supply-demand dynamics. However, others think that firming crude oil and naphtha prices may support a stable to slightly firmer outcome for January.

ICE February Brent crude stands at a 5-month high on a weekly average, according to ChemOrbis Price Wizard. Moreover, spot ethylene prices in Europe stand around 27% below the December ethylene contract level of €970/ton FD NWE, which also put pressure on contract negotiations.

Any spillover effect from firmer Jan prices in Asia?

Players also wonder if the firming in Asian PVC markets will affect the global sentiment. Following a Taiwanese major’s higher January PVC offers, US PVC offers to China also increased.

The Taiwanese major announced hikes of $10/ton on January PVC prices given the firming in China’s local PVC market, tightness across the region and improving demand in India.

Sentiment for European PVC improves in Turkey on strike-driven disruptions

Although disruptions from France triggered by strikes did not lead to major concerns within Europe, they have buoyed the sentiment among players in Turkey on top of the reports that fewer imports have made their way to Turkey recently. The Christmas holidays also contributed to the delays.

Is post-holiday outlook rosy?

Firming energy markets hold expectations firm particularly on the sellers’ side. PVC producers recorded margin erosion during most of the H2 2019, with prices hovering at multi-year lows. “Producers will attempt to reverse the trend with the support of upstream markets,” a player commented.

According to some sources, suppliers may try to avoid further margin erosion regardless of the outcome of the ethylene contracts. Lower caustic soda prices have also squeezed producers’ margins.

On the other hand, some buyers preferred to keep their stocks low as they predict no major changes in PVC prices next month amid the low season. Stability is expected to be extended into January given the lack of prospects of improved fundamentals in the post-holiday period. They said, “Prices may start to increase as of February, when the high season kicks off.”

A distributor of a West European producer also commented, “Even if ethylene settles higher, it might be difficult to pass monomer hikes on to PVC offers. Therefore, we mainly expect rollovers in January.”
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