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European PVC set to level off in May, sellers signal no price concessions

by Manolya Tufan -
  • 26/04/2024 (02:00)
Regional PVC markets recorded modest gains for another month in April, while producers failed to achieve margin expansion despite reduced imports and run rate cuts given that more was needed to tip the scales in their favor amid the absence of demand. May expectations call for a levelling off, considering tight producer margins on one side and unfavorable supply-demand dynamics on the other side.

Participants also sit tight ahead of potential provisional antidumping duties by the European Commission following the investigation initiated in mid-November 2023, which has been curbing interest for US and Egyptian PVC cargos. The market widely expects a decision to be taken by mid-May.

A quick look back at regional PVC markets in Q1

To have a better understanding of the market, let us see shortly what regional markets have been through so far this year. PVC followed a mostly stable trend amid sellers’ efforts to hinder further margin erosion, while prices rebounded from around a 3-year low in March. Hike requests in line with the entire monomer outcome proved unworkable in March and April amid unsupportive fundamentals, however.

In April, increases of €20/ton, matching the half of the ethylene hike, passed on most PVC deals. Although suppliers couldn’t boost their margins in the past two months, they were determined to avoid any losses.

Nonetheless, there is a growing competition among regional suppliers. Initial hike requests had to be trimmed in order not to lose market share. Stable prices were seen in a few cases depending on the starting level and purchasing amounts, as a side note.

Supply balanced with demand

Even though regional PVC plants have been running at around 65% rates for quite some time and import source have been absent amid hesitant trading and uncompetitive pricing, overall PVC supply was rather comfortable within the bloc. Exports also witnessed a slowdown given slower sales to the nearby outlets amid Ramadan lull.

This was mainly driven by muted derivative markets, with demand lagging behind seasonal expectations. Buyers stick to the hand-to-mouth purchases given lower consumption levels. Sales are slower in West European countries, according to some players. Confirming low order entries, a converter from the construction sector reported that demand is 6-7% lower in April. Meanwhile, pipe makers reportedly undercut prices given a lack of new projects and growing competition.

Adding to the situation were a lack of bullish indicators for the short run. Given rather stable projections, processors were not engaging in spot or distant cargos. A trader said, “Buyers are not in a rush to buy as they expect no firming ahead. Plus, no major uptick in demand is likely amid a holiday-shortened month in May.”

Eyes on potential provisional AD duties

As the gap between local and import markets is narrow, buyers have not been purchasing distant cargos for a while. The antidumping probe also kept them on their toes, leading players to reduce their purchasing volumes from the import market. Indeed, European players’ hesitance to engage in fresh US volumes reportedly lengthened availability for this origin in other global outlets.

Hence, there are some players thinking that a potential provisional antidumping duty will provide limited support for European producers and it will be hard to gauge its impact clearly unless demand returns.

However, as import purchases have been limited, not much volumes are awaited to arrive in June-July. Import volumes may fall further if US or Egyptian PVC can no longer be exported to the EU in case of provisional duties. This would cause existing demand to shift to local materials and allow producers to improve margins in June.

Prices to reach a plateau in May

With a lack of support for increases, May PVC expectations call for stability after a two-month long uptrend. Ethylene expectations are stable to slightly softer, while demand will remain tied to the basic needs amid holidays and the supply outlook remains stable.

On the flip side, there is little room for drops given tight margins on the producers’ side. Plus, the volatile energy complex amid the Middle East tension and the fact that current production costs are still elevated should be closely tracked.

A market source said, “We aim to improve our margins in May, but there might be no room for renewed hikes.”

Hike intentions on the table for June

Last but not least, PVC suppliers contemplate raising their June offers given that buyers will need to replenish their stocks at some point ahead of the summer holidays in July-Agust. A player commented, “It is the last month for trying hikes before the summer break. We may see pre-holiday restocking as buyers run with low stocks.”
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