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India PVC market Q1 2023 outlook: Bullish players bet on government fillips

by Shibu Itty Kuttickal - sikuttickal@chemorbis.com
  • 28/12/2022 (03:09)
India’s import PVC market is ending 2022 on a bullish note, and players are painting an optimistic picture for the new year, banking on demand being lifted by the government providing more funds for infrastructure projects as sweeteners ahead of general elections in mid-2024.

A brief look at price trends in 2022

ChemOrbis Price Wizard shows import PVC K67 prices rallied by about 20% from the beginning of the year till the second week of April, and then set off on an almost incessant slide until mid-November. Since then, prices have climbed steeply.

Still, PVC prices have slid by about 41% till the previous week from the average assessment of $1545/ton CIF India in the corresponding week of 2021, and by 55% from the historical peak of $2050/ton CIF India reached in October 2020. Domestic prices have by and large seen a similar pattern.

India – PVC – Local – Import

PVC K67 import prices were assessed at $880-950/ton CIF India in the previous week, or the penultimate week of the year. The low-end of the range continued to face upward pressure as there were no offers noted below $900/ton in the latest week. Good buying interest was noted at $900-950/ton levels, and offers were reported at levels above $950/ton CIF India, players said.

Improving structural demand for PVC

The trigger point for the current bull run was noted in mid-November as a Taiwanese major’s PVC allotments were taken up with much enthusiasm in the Indian market, which had till then been on an almost endless bearish trail since April. The allotments were bought out almost immediately after they were offered, which pointed to pent up demand in the country as buyers had till then waited for prices to keep falling. While a few players were hoping for prices to even out as requirements get resolved, others were expecting prices rising for a longer period.

“We’re currently seeing good buying interest at levels at and below $950/ton. We can easily sell volumes of about 5000 tons to our buyers at the low-$900s/ton,” said a Mumbai-based source of an international trading house. “The kind of buying interest that we’re seeing at the fag end of the year points to structural demand improving for PVC in the Indian market,” he added.

An eye on votes as govt seen boosting infrastructure funds

“We expect a strengthening in Indian demand next year,” he said. “Much of the heavy lifting for PVC in 2023 will be by the agricultural sector, which already accounts for more than 60% of India’s PVC demand. At the same time, we expect more government funds allocated for infrastructure schemes such as Jal Jeevan Mission and Har Ghar Jal scheme to facilitate better potable water connections in rural areas. This will certainly increase the demand for PVC pipes in 2023.” he added.

The expectations for the infrastructure boost have come as the current government, run by nationalists, will face general elections in 2024. And there’s typically a spending frenzy by the government ahead starting a year ahead of the elections.

Major PVC markets keep rising

Meanwhile, PVC traders, especially with principals outside the country, were eager to stick on with a strong pricing regime ahead, as they try to even out losses sustained in the current year. They said except for Europe, most markets were showing a steadily rising trend ahead, provided Asian demand, especially India’s, stay strong.

A Delhi-based trader pointed to the drying up of US-origin PVC into India and said, “The US destocking is over and with the current cold wave, we may not see offers from that market for some time ahead,” another trader said. “And prices are still lower, compared to a year ago,” he added.

There were some unconfirmed reports of US offers equivalent to $750/ton FAS Houston for January shipments, which could work out to around $900/ton CIF India, but these were not confirmed. “Actually, January offers are still being finalised. And we hear there’s a high possibility of US producers announcing force majeure. We’ll know about this by Wednesday,” said the trader, who is close to a major US producer.

Competitive prices to spur buying, say traders

While availability may not be a major issue in 2023, considering the fact that supplies from China was unlikely to dry up as the pandemic continued to keep Chinese demand weak, traders said this would only serve to keep prices within tradable limits and draw more buyers to the market.

 “You see this already in the market. While prices have risen sharply from levels seen in early November, this hasn’t kept away buyers. We’re still seeing a decent response to offers in the low-$900s/ton,” a Delhi-based trader said.

The caustic connection to PVC

A major reason for the fall in PVC prices in the current year was the surge in caustic soda prices, which led to higher production of the latter, along with a higher output of chlorine, which could only be used for PVC production.

“But lately, we have seen caustic prices falling in both the US and Europe, which should be accompanied by a fall in chlorine production. This could be a factor that would disincentivise a larger production of PVC next year,” the trader in Delhi said.

Drag factors in the market

At the same time, there were players pointing to factors that could still pull prices down. A major factor being noted is the continuing COVID spread in China. “This will continue to weaken Chinese demand and may mean more shipments from China moving towards India, especially as the government has not taken a decision yet on the safeguard duty that were to be imposed on PVC with a VCM content of more than 2 parts per million,” another Indian trader said.

But most traders agreed that the near term look bullish for PVC for Indian imports. “It’s perhaps difficult to have a longer vision for the market ahead of the first quarter. But as for the first quarter, our outlook is certainly bullish,” he added.
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