Expectations offer a mixed bag for Taiwanese major’s July PVC prices

As market players grope in the dark amid conflicting signals, a major Taiwanese producer is set to notify PVC offers for July to Asian buyers next week. With all eyes on China, expectations range from slightly lower to slightly higher from its June offers, with many participants also predicting a rollover next month.

”We are expecting a price rollover from June, which itself would signal a slightly bullish intent, considering that there are very few offers above $1400s/ton CIF India levels. At the same time, we wouldn’t be surprised to see a small reduction in the prices too,” said a Mumbai-based trader.

The Taiwanese major had announced June PVC prices with significant decreases of $130-150/ton to Asian markets. Its June PVC K67-68 offers were $150/ton lower at $1410/ton CIF India and $130/ton lower at $1210/ton CIF China, while FOB Taiwan offers also came in lower by $130/ton at $1170/ton. There was no volume discount being offered.

The state of Chinese PVC supply to continue to set the tone

Market sources pointed to conflicting signals baffling market participants at the moment, making it difficult to predict the market direction ahead.

Prices were reduced in the previous month mostly because of a supply overhang in China. Chinese cargoes, mostly acetylene-based cargoes, hit both the Indian and Southeast Asian markets, leading to import prices easing considerably throughout April and May.

Will Chinese PVC extend rebound?

The easing of lockdowns has led to slightly higher pricing ideas on Chinese origin shipments as sentiment improved last week almost after two months in line with the ease of lockdowns in early June. However, offers from China have dried up. “We are currently not seeing a lot of Chinese offers. There was a deal done for an acetylene-based shipment at $1340/ton CIF in end-May or early June, but offers have mostly been few and far between since then,” another Indian trader added.

If Chinese PVC continues to rise on the heels of reduced stock pressure and improving demand locally, the regional markets will definitely be boosted. But there is this critical question:

Will China’s demand return and supply overhang ease when fresh COVID clusters emerge?

Meanwhile, parts of Shanghai and Beijing have reported fresh COVID clusters leading to authorities announcing new shutdowns. “We really don’t know what the situation in China will be next month. If Beijing’s zero-tolerance policy continues, we may see lockdowns increasing, which could again result in a demand squeeze and higher import availability from China,” the trader added.

“As per the information we received last week, the Taiwanese major is looking to either roll over or slightly increase prices for July,” said a player in China. “We think the Taiwanese company is waiting to see how Beijing reacts to the new virus clusters. Otherwise, they would have notified July prices this week,” a trader in China said.

But a source at a producer in China said supplies in the domestic market are expected to rise as many plants on turnarounds since the beginning of the month are expected to be restarted in the weeks ahead. “We are not too hopeful about the outlook ahead,” the source added.

Crude oil surge versus US dollar strength

Meanwhile, traders also pointed to the crude oil price, which has jumped by about 9% over the last one month to around $122/bbl in the latest week. At the same time, the strength in the US dollar as a result of a four-decade high US inflation has also eroded currency values and import competitiveness of commodities across Asia.

“The crude price will possibly be one factor the Taiwanese producer may look at, but we think prices may mostly be rolled over from June. Demand is still weak and import prices are too high,” a Southeast Asian trader said.