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PVC buyers’ resistance limits Sept hikes, sellers remain bullish in Europe

  • 14/09/2017 (10:20)
In Europe, some PVC sellers have asked for increases of up to €40/ton, exceeding the half cost of the increase in ethylene contracts this month in an attempt to recover their squeezed margins. Tight global PVC supplies amidst planned turnarounds in Europe and force majeure declarations in the US following Hurricane Harvey are the main justification of sellers who are in quest of margin improvement this month.

In production news, Anwil is preparing for a planned maintenance in Poland this week for 15 days while Spolana is still facing some technical issues at its plant in Neratovice, Czech Republic. Many traders are also reporting to have already been sold out for this month for Central European PVC and not to have additional quotas for the rest of the month. The lack of imports from the US is also expected to be felt more visibly on the market in October.

A distributor said, “The near and medium term outlook is bullish as supply is tight on our side while the lack of imports from the US and Mexico, which is expected to peak in October and November, will also give suppliers an upper hand to request larger hikes.”

The closure of the Karlsruhe-Basel railway line for a repair work in South Germany is another concern among European players as transportation costs increased accordingly, although there was no concrete reflection on prices yet. The line is expected to be repaired by October 7.

However, players across Europe have so far reported only limited increases of €10-25/ton in September PVC deals as buyers are mostly resisting increases more than the half cost of the monomer hikes especially if they covered their needs last month. Their negotiations are still underway with the suppliers who ask for larger increases.

A compounder in Italy confirmed, “We are waiting for some Mexican cargoes we purchased last month. As we are not in urgent need of material, we will take our time.”
A buyer in the Netherlands who received offers with €25-40/ton increases reported, “We are still discussing with the suppliers as we aim to pay only €15-20/ton increases.”

Some players expect more September deals to be wrapped up with relatively smaller increases of €10-25/ton. However, others think that these suppliers, who are in quest of margin improvement, have enough justification to stand firm on their hike targets and they may not step back from their initial offers. Global supply issues and the upward momentum may also help regional sellers focus more on exports with better netbacks. A trader in Switzerland already said, “We are diverting our allocations to other markets since European converters are reluctant to accept our prices.”
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