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Indian PVC players expect bullish trend to taper off for August

by Abdul Hadhi - ahadhi@chemorbis.com
  • 08/07/2020 (04:01)
After sharp increases in PVC offers for June and July, the Indian market is less exuberant about August offers due to the monsoon effect and fears over another wave of COVID-19 infections.

August offers by the major Taiwanese producer - which usually sets the lead for India and other Asian markets - are expected to be announced later this week or next week.

“Regarding the August offers, new prices are likely to be rollovers as demand is not really good due to the monsoon,” a source at a Northeast Asian producer said. Sounding a bit more positive, a source at a South Korean producer added that some in the market expect another increase but at a lower margin.

The Taiwanese major had lifted PVC offers to Asian markets, including India, by $40/ton for June and by $90-100/ton for July amid pent-up demand as countries came out of lockdowns. It had skipped May offers to India due to diminished demand amid the COVID-19 social restrictions.

The weekly average of import PVC K67 prices into India increased 34% from $640/ton in early-May to $860/ton CIF India in mid-June before edging lower to $850/ton at end-June, according to data from ChemOrbis Price Index data.

Monsoon combines with second wave

Expectations are more subdued for August in India due to the monsoon season, which runs from June to September and sees heavy rains much reducing agricultural and construction activity which are key consumers of PVC pipes.

The impact of the monsoon was offset in June and July by pent-up demand due to reduced domestic production during the earlier lockdown. Additionally, purchasing over the two months also suggests that buyers might have fairly adequate stocks.

Another factor that would affect demand in August are fresh cases of COVID-19 in the country, which has prompted the key states of Maharashtra and Tamil Nadu to re-impose lockdowns. India’s biggest city of Mumbai is in Maharashtra while Tamil Nadu houses Chennai - another major city.

India has overtaken Russia recently to become the country with the third biggest number of COVID-19 cases in the world after the US and Brazil. It has more than 690,000 confirmed cases and more than 19,000 deaths.

Tight supply may provide support

Despite reduced demand, PVC prices are likely to derive support from tight supply going ahead.

In Japan, Taiyo Vinyl’s 90,000 tons/year Chiba unit is due for scheduled maintenance for three weeks in July-August while FPC’s 458,000 tons/year unit at Mailiao in Taiwan has a turnaround planned for mid-August.

Meanwhile, US supply will be affected by planned maintenance at FPC’s 513,000 tons/year unit at Baton Rouge in Louisiana.
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