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Indian PVC market evaluates denomination decision ahead of Dec offers

  • 15/11/2016 (03:30)
In India, PVC players are currently evaluating the government’s decision to replace high-denomination notes from circulation as of November 8. The move aims to combat corruption, black-market trade, and tax evasion. Many players report that market activities have slowed down after the government’s sudden decision and they think that a Taiwanese major may be unable to lift PVC prices for another month even though ongoing PVC tightness in global markets still supports the sellers’ hand.

A plastic end manufacturer reported that the Taiwanese major will not be able to implement huge increases in December as market activities are stagnant after the cancellation of 500 and 1000 rupee notes. He added, “This week there will be a conference and the Taiwanese major will be attending. Once the producer realizes how slow the market is moving in India, demand will be the main factor setting the direction of the market rather than supply.”

A source from a domestic petrochemical producer commented, “The government’s sudden decision has created chaos in the market. Banks were closed for two days while withdrawal amounts were limited at ATMs. This means that players returned from the Diwali holidays with no money to spend. Demand was expected to pick up after the holidays, yet the post-holiday activity is disappointing as everything has slowed down.”

A source from a Japanese producer stated that they are yet to announce their new offers as they are waiting for the Taiwanese major’s new offers. He also said, “We heard that the producer will announce its prices on November 21. Market players are feeling negative for any hike attempts as demand from the Indian market is below expectations.”

However, a source from the Taiwanese producer pointed to globally tight PVC supplies and reported that further hikes are possible in December. “The Indian government’s sudden decision will impact the market. We think that it is a good decision by the Indian government to overcome corruption. At the moment we cannot gauge the demand situation in India, but we are going to visit India to meet with market players. However, supply to India’s market will be quite limited. There will be less quota from China which is one of main PVC suppliers of India as supply levels are already limited in China. Even though Indian market players claimed that there will be more deep-sea cargoes such as Brazilian, these cargoes will not be able to cover reduced import volumes from China. In addition, US cargoes are also reduced in the market due to turnarounds and we also reduced operating rates at our plant due to short ethylene supplies. Considering all these factors, we see that another round of increases of around $50/ton is possible for December,” opined the source.

A trader commented that a panic sentiment dominates the Indian market nowadays and they expect that it will last until the first week of December.
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