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Hikes in Asia July PVC offers baffle some buyers, further rally under discussion

by Abdul Hadhi -
  • 16/06/2020 (08:36)
In the Asian markets, the sharp hike in July PVC offers by a major Taiwanese producer has taken some buyers by surprise. The increases, which were then followed by other suppliers, were seen as out of proportion to the current state of supplies.

Lack of plant shutdowns raises questions over tightness

“We are surprised by these $90-100/ton hikes for July shipment as well as the Taiwanese major’s less than normal allocation as we haven’t heard of them undergoing any turnarounds recently,” a Malaysian trader said.

In terms of supply, no maintenance shutdowns are scheduled in Taiwan while Hanwha Solutions turnarounds of its units in Ulsan and Yeosu are due for completion in June, according to ChemOrbis production database.

The only restraint on supply in terms of regional shutdowns is the closure of one of Taiyo Vinyl’s three PVC lines in Japan due to financial reasons amid weak demand from June. Its two other lines continue to operate.

Deep sea cargoes, India low season may work against more hikes

Amid relatively few turnarounds, supply is also benefiting from deep sea cargoes.

Material from Ukraine, Argentina and Mexico was offered in limited quantities into India early in June, possibly for arrival only in August while US cargoes have been offered for end June-early July shipments, according to traders.

Beyond what appears to be enough import supply, market players also point to the monsoon season in India, which is traditionally a period of low demand. Demand for PVC pipes is usually low during this time - which runs from June to September - as heavy rains reduce construction and agricultural activity as well as transport by trucks. Additionally, choppy seas make loading and unloading at ports more difficult.

Some other countries, such as Vietnam, experience the rainy season around this time as well, which affects demand.

“Demand is still okay but this time, prices increased quite a lot. So, we think buyers will start to buy on a need-to basis especially now as Vietnam is in the rainy season and demand will slow a bit,” a regional trader said.

Could June, July allocations have satiated pent-up demand?

The hikes by the Taiwanese major raised July offers by $100/ton to $840/ton CIF India and by $90/ton to $790 CIF China. Other suppliers followed its lead, including a South Korean producer, which raised July offers by $105/ton to $840-845/ton CIF India.

Inside India, a major domestic producer lifted its offers twice last week in the wake of the higher import offers. The robust demand has been attributed to tight domestic supply as production had been curtailed during the lockdown. However, whether the market can digest more hikes amid current conditions remains a question mark.

Weak demand during the lockdown had prompted the Taiwanese major to skip May offers to India altogether For the rest of Asia, offers were down $160/ton in May.

Import PVC prices into India fell to $640/ton CIF in early May - the lowest in the nine years ChemOrbis has been compiling data. Since then, the import PVC market in India has increased by more than 33%.

A similar scene occurred in Southeast Asia, where import prices hit a low of $630/ton CIF SEA - the lowest since November 2008 - around the same time.

India and several Southeast Asian countries relaxed COVID-19 restrictions starting from last week, prompting expectations of economic recovery. However, market players stress that such recovery is likely to be gradual rather than quick.

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