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June PVC hikes exceed expectations in Asia, sustainability under discussion

by Merve Sezgün -
  • 21/05/2020 (03:39)
In Asian PVC markets, offers for June have been announced with hikes that exceeded players’ expectations of $10-20/ton. After a major Taiwanese producer pioneered a $40/ton hike, other regional producers followed suit and approached the markets with similar price increases for June.

For the past few weeks, strong demand from China has eased domestic and overseas suppliers’ stock pressure to some extent in the absence of India while firming upstream costs have also lifted the sentiment. “Still, we were expecting to see smaller gains in new June offers as India, the major PVC importer, remains under lockdown amid the approaching monsoon season,” some players commented.

How much will India buy?

On May 19, the Taiwanese major announced its June PVC K67 offers to India at $740/ton CIF, cash after skipping May offers due to a sharp drop in demand amid the lockdown.

Following the initial announcement, new offers from Japan and South Korea were revealed $30-50/ton higher from May at $720-740/ton on similar terms. US offers also moved above $700/ton CIF after increasing steadily from around $630/ton two weeks back, traders reported.

Now the question in players’ minds is how much India will buy amid an extended lockdown combined with an impending rainy season. “We are not feeling sure about the sustainability of this upturn if demand from the largest PVC importer remains limited,” commented a seller.

“Demand from China is buoyant and supports suppliers’ June pricing. However, with India still in lockdown until May 31, producers will have to wait to check buyers’ appetite for higher priced PVC cargoes,” a trader also said.

India has extended its lockdown for another two weeks to curb the spread of coronavirus. First introduced on March 24, the country has extended the world’s largest lockdown a number of times.

Some players, on the other hand, looked at the situation from a different angle and said, “We believe that Indian buyers will be willing to replenish for June as the current price levels actually indicate a decrease of more than $100/ton if we compare them to the pre-lockdown levels in April.”

Demand from SE Asia not promising either

Taiwanese major’s $40/ton hike for June caught many buyers in Southeast Asia by surprise as initial expectations were mostly calling for slight increases.

While impending easing of lockdowns has created optimism, players were somewhat skeptical if the market can fully absorb the higher prices.

“Regional demand is still not strong enough to absorb such a price hike as coronavirus restrictions continue in most countries. We think that many buyers will resist the higher offer levels,” said a converter.

Lockdown ends in Vietnam, but rainy season to temper demand

Vietnam has been the first regional country to lift its COVID-19 related lockdown, raising hopes that its economy may recover faster. Demand has improved slightly since the lockdown was lifted, yet players always note that it has not been a strong recovery as the country’s most export outlets continue to struggle with the pandemic.

“We think that demand towards June cargoes will be limited as several buyers in Vietnam replenished their stocks when prices were as low as $600-620/ton CIF. On top of that, the rainy season will soon begin and further weigh on the buying sentiment,” a buyer commented.

Activity will further decline due to Eid holidays

A few players explained, “With the end of Ramadan approaching this weekend, markets in regional countries such as Indonesia, Malaysia and Singapore are likely to turn quieter as market players will go on holiday.”
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