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July PVC dealt lower in Europe, what lies ahead for August?

by Manolya Tufan - mtufan@chemorbis.com
  • 15/07/2019 (04:02)
In Europe, PVC suppliers largely conceded to the 50% of the ethylene drop due to comfortable supplies and weak demand despite their initial efforts to keep the monthly drop smaller. This is the second month in a row PVC prices decreased since January, as ChemOrbis Price Index suggests a cumulative drop of 7% on average in Italy.

July PVC deals closed down €30-35

Sellers had to step back from their initial offers that indicated smaller drops than the half of the ethylene outcome to be able to move cargoes. Deals started to be closed down by €30-35/ton after €15/ton drops proved to be unworkable. This was because buyers continued to buy on a hand to mouth basis, although they had postponed their purchases to July.

Plus, buyers have favored the local market over imports due to competitive levels. US PVC failed to stir buying appetite as offers nearly stood at par with the local ranges.

Overall supplies are comfortable despite lost parcels

Players reported no supply issues despite some production outages or planned maintenance shutdowns in the region.

According to a source close to the company, Hungary’s BorsodChem was expected to conduct an annual maintenance shutdown at its 400,000 tons/year PVC plant in Kazincbarcika starting from July. The duration of the shutdown was not disclosed at the time of publication.

Production issues or maintenance shutdowns at upstream units also affected some regional producers’ downstream PVC rates, according to participants.

August outlook mostly stable

A mostly stable outlook is projected for August, when most converters will be out of the market for three to four weeks due to the summer break while several producers will conduct maintenance shutdowns. According to players, not much activity is likely to take place, with August being a transition month.

“We expect rollovers for both ethylene’s outcome and PVC prices,” a major participant opined.

Players seem to have postponed recovery expectations to September, when some cracker maintenances will take place and a possible revival of demand in line with buyers’ return to the market may tip the scales in favor of a PVC increase after the holidays. “Prices may see an increase only starting from September,” a trader argued.

How about spot ethylene at20-week low? Will it cast a pall over possible stability in PVC?

On a side note, the movements of ethylene prices will be an important factor to watch. Spot ethylene prices were on a downward trajectory since early June to drop by 20.5% since then, the weekly average data on ChemOrbis Price Wizard show. A large portion of this decrease occurred in June while prices have eroded further by almost 7% in the first half of July so far.

Lengthy supplies amid increasing imports and limited buying interest ahead of the approaching summer season have pushed prices to their lowest levels not seen since late February 2019 recently. Spot prices were last quoted at €850/ton FD NWE, which stands well below the July ethylene contract settlement.
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