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Expectations for May PVC pricing call for sharp decreases in Asia

by Pınar Polat -
  • 08/04/2020 (03:58)
Muted demand amid coronavirus-related lockdowns in India and Southeast Asia has pushed Asian players to anticipate drastic monthly decreases of up to $100/ton for a major Taiwanese producer’s May PVC pricing, which is expected to be announced within the next two weeks.

India, a key market for PVC, has gone under a complete lockdown for a period of 21 days starting from March 25 in a bid to contain the spread of coronavirus. This pushed several producers in the country to declare force majeure or even shut their plants temporarily.

All regional countries in Southeast Asia, except for Indonesia, have also ordered some quarantine measures with the same purpose.

Import PVC at nearly 4-year low prior to May pricing in India, China

According to the ChemOrbis Price Index, the weekly averages of PVC K67 offers on CIF China/India basis were standing at their lowest levels since June-July 2016 during the week ended on April 3.

The April announcement was the first price cut from the major producer since the beginning of 2020, indicating a $50/ton decrease to both China and India on the month. Now that the major producer is expected to announce its May offers with more drastic drops, these markets are likely to see new thresholds in the weeks to come.

Some comments from regional market players

A source from a Japanese producer commented, “We think that the Taiwanese major will cut its new offers at least by $100/ton as regional and global demand have been fading away due to the war with the COVID-19 pandemic. Even the world’s largest PVC consumer, India, has been under a lockdown. In order to see business transactions, offer levels must be around $700/ton CIF China/SEA and $800/ton CIF India for May, we believe.”

A source from a Chinese producer also evaluated the possible impact of any price cut from the major producer and said, “There is market talk that the major producer will apply a deep cut on its May PVC prices. In such a scenario, China’s local PVC market as well as global PVC markets will face challenges.”

A source from a Taiwanese producer also opined, “The latest price indications from India are indicating around a $100/ton price gap with the major producer’s April levels. We think that the major producer will take this into consideration while determining their new levels.”

Crude rebound leads to firmer PVC futures

On the other side of the coin, September PVC prices on the Dalian Commodity Exchange have been gaining ground since last week in response to the rebound of crude oil futures.

Chinese players are now observing whether firming futures will reflect on spot PVC prices as the downward pressure from muted demand along with the inventory pressure inside China still continues. A Chinese producer reported that their acetylene and ethylene-based PVC prices stabilized this week, but underlined that COVID-19 pandemic still dampens buying sentiment.
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