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European PVC producers start revealing April offers, drops vary in size

by Manolya Tufan - mtufan@chemorbis.com
  • 06/04/2020 (10:51)
PVC producers in Europe voiced their intention to apply smaller decreases than the half of the ethylene drop for April, with the emergence of initial announcements justifying this. Producers aim to keep the downtrend in check despite factory closures amid coronavirus-related lockdowns.

Discounts vary as initial offers emerge

Although not all regional producers made official announcements, some of them approached the market with drops of €50/ton, which corresponds to the 25% of the ethylene drop. Meanwhile, some suppliers chose to apply larger decreases of up to €80-90/ton on their fresh PVC offers.

This contrasted with earlier expectations calling for reductions mostly in line with the 50% of the ethylene drop ahead of the monthly contract settlement. Considering the magnitude of the ethylene drop, producers are likely to limit the size of the discounts.

A source from a West European producer reported, “We applied a €50/ton reduction in our offers, avoiding the entire half of the ethylene drop. Hefty drops may jeopardize the current market conditions, which is also not good for manufacturers.”

Currently, some producers are running their plants at full rates while some of them have already reduced operating rates. More suppliers may cut production rates at their plants to cope with the logistics mishaps as well as shrinking demand on the manufacturers’ side. Plus, a lack of manpower amid contagion risks may also result in rate cuts at plants.

Logistics issues hinder imports

Polymer markets globally face more disruption to supply chains, with vehicles being delayed by lengthy customs checks. Limited container availability around the world as well as coronavirus related lockdowns resulted in reduced imports, while logistics concerns have already curbed demand for distant cargos.

Although many ports remain open, reduced manpower at ports and warehouses served to slow down distribution of materials and raised concerns over possible supply disruptions.

Producers think that the lack of imports may stir buying appetite for prompt materials.

A manufacturer affirmed, “The lack of imports and reduced PVC output are cited as reasons behind PVC producers’ motivation to apply limited reductions.”

Export markets stagnant amid safety measures

Still, trading activities in Europe’s main export destinations, Turkey and India, ground to a halt amid concerns over the coronavirus and a global recession. India imposed a nationwide lockdown that will persist until April 14. Demand for certain PVC applications in Turkey has also eroded due to the impact of the COVID-19 outbreak and subsequent lockdowns across the globe.

Demand poised to slow down further with Easter break

As for April, virus-hit demand throws a spanner in the works. Demand has started to slow down as of mid-March, with orders being cancelled due to the COVID-19 pandemic.

Several factories in the automotive and construction sectors are either shut or only a few of them still continue operations at reduced rates. The closure of construction sites deeply affected a wide range of end markets. Window profile companies closed their factories after order cancellations, while the cable sector also stopped. A pipe maker said, “9 out of 10 of our customers are shut.”

Demand outlook for April is not promising not only because of the lack of new orders but also because of the Easter break, the duration of which will vary depending on the country. A player opined, “April will be calmer than usual due to the virus impact.”

Grappling with the stagnancy in their end-product businesses and order cancellations, some converters may even avoid engaging in fresh volumes despite lower prices amid the bleak outlook cast by the coronavirus outbreak.

Players do not exclude the possibility of larger decreases as the month wears on as buyers find smaller drops unjustified under the current market conditions.
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