Freight rally set to prompt Taiwanese PVC major to hike July offers

As freight rates have kept up the upward pressure on Asian PVC prices, a major Taiwanese producer is expected to shortly raise its benchmark offers to major Asian markets for the second straight month. The major might want to see the energy and feedstock market direction ahead before deciding its July pricing, but the market is almost unanimous in predicting higher pricing levels for the month.

The extreme freight market volatility has been apparent in recent weeks. The Northeast Asia/India freights are currently being quoted in a $140-170/ton CIF, from around $50/ton two months ago. “We may not have seen yet the end of the current rally in freight rates,” an Indian trader said.

$100/t extra charge for freight rate surge

In fact, a South Korean producer notified customers in India of an additional $100/ton charge for June and early-July shipments because of the surging freight rates in a notification that pointed to the extreme container space tightness and the steep rise in ocean freights.

Shipping liners are accepting limited bookings, and charging “huge surplus costs” on top of the normal freights, it said. “We’d only be able to make partial shipments if we satisfy the required liner conditions,” it added. A couple of weeks ago, the Taiwanese major informed customers on its inability to commit to additional shipments for June because of the steep freight situation.

Some players expected the major to hike prices sharply above the $900/ton CIF India mark, but others said the major could raise prices by more than $20-30/ton. As for June, it raised PVC K67-68 prices by $20-30/ton higher from May to $830/ton CIF India, at $795/ton CIF China, and at $750/ton FOB Taiwan.



ChemOrbis Price Wizard shows that India’s PVC K67 prices have jumped by 16% to the current midpoint of the assessment range at $900/ton CIF, while Southeast Asian assessments have risen by about 10% to $810/ton CIF, and Chinese to $782/ton since mid-April.

In India, the world’s largest importer of PVC, traders said there was certainly a significant increase in buying and selling ideas although that didn’t yet mean an improvement in real demand. “Prices have certainly risen as a result of the increase in freights, and this has spurred some buying interest for smaller volumes, but it may take some more time for real demand to strengthen,” a PVC trader in India said.

Chinese shipments dry up

What ensued from the surge in freight rates was a drying up of Chinese shipments which used to account for a major share of imports into India. Chinese shipments were also drying up in Southeast Asian markets because of the freight surge. “What has happened lately is the near absence of Chinese-origin offers on a CIF basis. There are FOB offers, but the steep freight rates have distanced buyers from those too,” another PVC trader in India said.

And in Southeast Asia, a trader in Vietnam said sellers were staying aloof from the market, waiting for better clarity on the freight rates. “Sellers are keeping away and are not willing to part with large volumes as they are waiting for the market direction to evolve,” he said. “The Taiwanese major may not notify its July prices in the current week,” he added. Meanwhile, in China, surging freight rates are underpinning high PVC prices, while the strength in the Indian markets encourages further increases from Chinese exporters.

Japanese origins look for SEA homes as India freights unviable

Traders reported Japanese import offers at the high end in India. A duty-free shipment from a Japanese producer was offered in the previous week at $1030-1040/ton CIF India, translated, with a 7.5% customs duty, to $960-970/ton CIF for dutiable shipments. Traders also reported the lowest Japanese duty-free offers at $1000/ton, equivalent to $930/ton CIF for dutiable ones. A Singapore-based trader added, “With freight rates to India turning uneconomical, the Japanese are looking more at Southeast Asian, mostly Vietnamese, trades.”

At the low end were US shipments reported at $870/ton CIF India. In the current week, a trader is thought to have sold shipments totalling more than 1,000 tons to Indian buyers at prices averaging around $885/ton CIF India.

Although energy and feedstock prices have lately seen a bearish trend, sellers have continued to seize the opportunity of higher freight costs to keep import prices higher.