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Fundamentals muddy Asian PVC market outlook even as prices rise

by Shibu Itty Kuttickal -
  • 31/01/2024 (03:28)
The Asian PVC markets have moved up due to rising energy and feedstock prices, elevated freight rates, and a total absence of US-origin shipments. However, the demand has not shown much enthusiasm, as supplies stay adequate, limiting price increases. The market direction in the near term is not too clear, caught between cost escalations on the one hand and weak demand on the other.

A potential resolution to the Red Sea shipping tensions as well as an easing of the North American winter could bring back US shipments to Asia. For the moment though, US shipments are off the table because of higher FAS Houston prices as well as the Red Sea Houthi rebel attacks on container vessels.

India, SEA prices rise 4% since beginning of year

According to data from ChemOrbis Price Index, the weekly averages of import PVC K67 prices in India and Southeast Asia have seen a 4% increase since the beginning of the year, while import prices to China have edged up by more than 1%.

Meanwhile, a $20/ton hike by a major Taiwanese producer on its offers to Asian buyers has been accompanied by similar hikes by other Northeast Asian sellers to the region, although players believe the buying response hasn’t been too brisk.

The Taiwanese major is thought to have allocated about 12,000 tons to India for February, which were sold out the same day its pricing notifications were sent out to buyers. Subsequent offers from elsewhere have not found the same response, players said. However, the latest Taiwanese allocations have been lower than recent ones because of the major’s ongoing turnarounds.

Imports to India in recent months are thought to be lower. ChemOrbis Import Statistics suggest that the country’s PVC imports saw a notable 29% dip in November compared to the previous month. This decline brought the monthly PVC import volume to 215,730 tons, marking the lowest figure since June 2023.

Price rise concerns trigger some buying in India

In India, major players said there was some buying discernible at the low ends, but this was mostly because of a concern that prices could rise ahead.

“There is a fear that the latest increase in energy and ethylene costs, coupled with the rise in freight rates, could keep lifting prices in the near term. This has resulted in some limited buying, but we haven’t yet seen a major shift in sentiment, at least not in India,” said a major India-based trader.

Players also expect major incentives in the interim budget expected to be tabled in the Indian Parliament on February 1. An interim budget is being presented as general elections to the Lok Sabha, India’s lower house of the Parliament, are slated for April/May.

“We expect the budget to contain substantial benefits for infrastructure projects, to woo more voters to support the current ruling coalition led by the Bharatiya Janata Party (BJP),” another trader said. “The BJP is regarded by the market as more business- and market-friendly than other political parties in the country, and the general expectation of it returning to power is thought to be good for the markets,” he added.

Apart from the macro picture, traders point to the total absence of US shipments because of the Red Sea attacks. “Besides higher freight rates, this has meant long-winded routes that take up to three weeks more to the Asian destinations, leading to players shunning US origins,” another trader said.

While US origins have been absent, Chinese origins dominate the current offerings, with prices about $10-20/ton higher than the previous week. A South Korean seller offered February shipments at $780/ton CIF India, around the same as its offers in the previous weeks. A Japanese producer’s duty-free offers were noted at $850/ton CIF India, equivalent to about $790/ton CIF for dutiable origins.

Holidays ahead seen denting demand in China

Meanwhile, in China, demand has tapered ahead of the Lunar New Year holidays.

“Despite the February hikes by the Taiwanese major, the sentiment has remained the same. The activity remains limited, given the downstream manufacturing at reduced rates. The buying sentiment has remained cautious, while local supply has remained ample due to the lack of buying,” a major Tianjin-based seller said.

A Chinese polymer trader said the approaching holiday season may mean significant weakness in demand as most domestic downstream industries are expected to shut down. “And, despite recent export-driven optimism and macroeconomic factors, spot market prices may remain under pressure, considering the weakened fundamentals,” he added.

SEA sees pick-up in demand after Taiwanese pricing

As for Southeast Asian markets, an increase in demand was seen since the latest pricing notifications by the Taiwanese major, traders said.

“Buyers wanted to hedge against any further price hikes,” an Indonesian trader said. A Philippine converter also sensed a “a small uptick in demand as buyers expected further hikes post the holidays”. A Vietnamese converter expected prices to stay firm as energy and ethylene costs were rising. “Demand for our products remains slow. Nevertheless, we’re planning to replenish after the Chinese New Year holidays,” he added.
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