Margin recovery priorities outweigh supply imbalances in European PVC markets

European PVC markets are experiencing a resurgence in February, driven by strategic margin-enhancement efforts, as several key players have implemented price increases of up to €40-50/ton. This followed a period of modest price concessions by late Q4 given excess supplies, with February ethylene settlement providing suppliers with the leverage to raise PVC offers.

Early February has been marked by a blend of price hikes for both local and import prices, supply adjustments and mixed demand views. As has been the case for several months, the ongoing supply-demand imbalance and buyers’ resistance to steep price increases suggest that this month is poised to witness intense negotiations.

Price hikes vary for PVC

Increases aligning with either half or the full extent of ethylene, from around €25/ton to €50/ton, were revealed for February PVC prices. European PVC producers look to recover from negative margins by applying hikes beyond the 50% of ethylene, bearing the additional burden from rising energy prices in mind. They applied increases of €30-50/ton depending on the starting level, although some buyers reported to have received offers with smaller hikes of €25/ton in the spot market.

A major market participant said, “We are standing firm, with no intentions of revisions later in the month. Our main target will be avoiding any further financial losses.”

A different producer source said, “Significant increases are in place on the low end of the price ranges, while deals may be closed with €25/ton hikes on the upper ends. Despite that, it is challenging to pass these costs onto customers due to the ongoing low season.”

Demand slightly wanes in reaction to hikes

Firmer February outlook paved the way for an increase in purchasing activity in January, when buyers returned to the market to hedge against future hikes. Although price inquiries are still vivid, some suppliers have noticed a decline in sales volumes in the first half of February as buyers adjust to higher prices.

There have been regional nuances though, with stable demand being observed in certain markets, considering the permanent closure of Spolana, which prompted buyers to seek alternatives and explore other suppliers.

Producers are facing challenges in balancing price hikes with customer resistance. Large buyers are pushing for hikes in line with the half of ethylene, blaming poor derivative markets due to the winter conditions and macroeconomic hurdles. The uncertainty over demand levels and buyers’ resistance to price increases will likely continue to shape market dynamics in the short term.

How do European PVC producers evaluate import alternatives?

Following the definitive antidumping measures on imports from Egypt and the USA, there have been limited alternatives. Players reported higher offers from Mexico, considering tight availability stemming from VCM issues.

In the absence of these sources, discussions have been ongoing regarding a potential rise in PVC imports from Asia, contingent upon the feasibility of freight costs. Regional producers are not yet feeling the pressure of competitive prices from Asia.

A participant opined, “European buyers are unaccustomed to sourcing from Asia and may hesitate to select certain Asian origins, despite the appeal of competitive prices, due to concerns over quality. This may keep demand largely domestic.”

Further hikes on horizon for March

Producers are expected to focus on margin recovery as their primary goal in the coming months, with most players adjusting their pricing strategies to reflect current cost structures. The introduction of import PVC from Asia could play a crucial role in pricing pressures, though quality concerns may prevent a significant shift toward these imports.

Players will closely watch how the demand-supply dynamics play out, with price hikes expected to continue. The anticipated turnarounds by some key producers will likely reduce supply, which may help restore the balance to some extent and allow for further hikes. The PVC market is expected to extend gains into March, particularly as the winter season nears to its end and demand across various sectors ramps up.

Looking from an economic perspective, authorities generally expect the ECB to cut rates further. Germany, considered to be the engine of Europe’s economy, heads to the polls on February 23. By late January, Germany lowered its forecast for economic growth in Germany in 2025 to 0.3% compared to the previous forecast of 1.1% growth. Major shifts in global economy and structural challenges dent the economic outlook across the board, which will undoubtedly make itself felt in the automotive and construction sectors, where PVC is extensively utilized.