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European PVC set to extend longest rising streak into May

by Manolya Tufan -
  • 19/04/2021 (03:42)
European PVC did not take a break from the longest-ever rising streak as April deals were closed with hikes of up to €170/ton amid tighter supplies. Players expect the uptrend to extend into May, which would mark the 12th straight month of hikes.

3-digit hikes pass on deals amid vivid downstream procurement

As the supply situation deteriorated amid maintenance shutdowns at upstream units and lingering outages, converters consented to increases well beyond the ethylene hike of €40/ton. PVC deals were mostly closed with €150-170/ton hikes from March, with demand outpacing existing capacity amid vivid end markets.

Several converters lamented that they could only meet part of their requirements due to the ongoing shortage. Allocation cuts occurred also in the contract markets for another month.

Gap between Europe and other markets narrow

Europe was by far the lowest priced region as it lagged behind the global bullish run despite the premium it should carry under healthy market conditions. The gap between the region’s spot and export markets narrowed following hefty April hikes in Europe. The US dollar equivalence of average spot K67-68 prices in Italy nearly came at par with India’s import market, while the Northwest European market traded at par with China and Southeast Asia’s import PVC markets.

Still, Italy and Northwest Europe’s K67-68 markets trade below Turkey and Egypt’s import markets.

As can be seen from the below graph, Italy still stands $235/ton below Turkey’s non-dutiable import K67-68 range. Prices in Northwest Europe trade nearly $370/ton below Turkey, meanwhile. The huge gap between Europe’s spot and export markets has been one of the main drivers behind producers’ higher pricing policies.

High prices here to stay for a while more

Apart from lower rates and ongoing maintenance shutdowns, Inovyn and Kem One’s force majeures remain in place. Although the two producers resumed operations at their plants, they need to rebuild safety stocks before lifting force majeures. Still, backlog orders and higher requests from irregular customers have prevented them from building stocks so far.

As for imports, US PVC re-emerged after a long period of absence. However, prices were deemed unworkable as they stand well above Europe’s spot price ranges.

With no sudden supply relief on the horizon, participants expect the firming trend to stretch to May. If this materializes, PVC would have been steadily rising for a year.

According to the weekly average data on ChemOrbis Price Index, spot K67-68 prices in Italy posted a cumulative increase of €675/ton or 92% since the uptrend kicked off in early June 2020.

PVC uptrend set to lose steam

Nevertheless, players have noticed a change in buying appetite recently in response to the successive hikes. Even if Europe lacks the premium it should carry above export markets, buyers find the prevailing prices high to work as spot PVC prices stand at historic highs. Several converters noted, “Even if we raised our end product prices, we could only achieve partial cost past-through.”

To this end, early May expectations call for smaller hikes compared to the 3-digits seen in March and April. Players voiced their expectations to see increases of around €50/ton or beyond that regardless of the ethylene’s outcome.

Some converters in the compound and pipe sectors may have to halt their lines amid the lack of raw materials including pigments, additives, and plasticizers. Frequent delivery delays also deter buyers from purchasing.
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