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PVC demand lags behind expectations despite high season in Europe

by Manolya Tufan - mtufan@chemorbis.com
  • 20/05/2022 (03:04)
May has been a month of moderate drops in Europe’s PVC markets following the longest rising streak. A decline in purchasing activities was cited as the key factor behind the recent softening as several players confirmed that overall consumption is lower despite the high season.

Demand has not been up to seasonal expectations

Sellers had pinned their hopes on a seasonal pickup in demand for certain downstream sectors. However, not only inflated utility costs and resin prices but also cautious consumer behaviour amid war-related uncertainties have kept purchases hand to mouth during May.

According to players, manufacturers of rigid pipes and profiles reported a slight slowdown in their businesses. Small companies in the construction sector opted for postponing or cancelling new projects due to inflated price levels and a lack of other components. Some window profile makers were optimistic amid ongoing renovation works, however.

Meanwhile, the resumption of public works may be stymied by the volatile nature of upstream costs as these projects are based on deferred payment terms. Pipe makers witnessed a slowdown in demand after revising their list prices upwards, as a player put it.

While the footwear sector has been underperforming, players reported patchy demand in the cable sector. Some cable makers in the building sector reported to have regular order entries but those in the automotive sector continued to witness sluggish demand. Cable makers could pass costs onto their customers to some extent at least.

A compounder and a pipe maker reported respective drops of 20% and 30% in their demand this month only.

Converters hold high cost material in stocks

Manufacturers were eager to liquidate their end product stocks, which were built at inflated levels. They bought less fresh material to produce, while their consumers also keep purchases hand to mouth as it’s possible to see drops in end prices in the near term.

A pipe maker commented, “We can reduce our end prices only slightly if PVC drops in June as our finished materials were manufactured at higher costs. Demand for PVC irrigation pipes is lower from 2021 but it is in line with 2019.”

Weak demand cushions the impact of tightness

Supply restrictions have kept May drops moderate, needless to say. Regional supplies are tight amid scheduled turnarounds as well as force majeures, while supply tightness failed to create a boost for pricing as opposed to previous months. A major market player remarked, “If it were not for tight market conditions, prices would be under a strong pressure.”

Despite limited PVC production and low producer stocks, converters could get their regular volumes or more from certain suppliers. A player said, “Our supplier can give more volumes despite their limited availability. This is a result of low price inquiries.”

As a side note, delivery delays persisted not only from overseas markets but also from landlocked countries due to a lack of truck drivers. Importing material particularly from the US is deemed risky due to delivery delays.

June expectations softer

As ethylene expectations started to emerge softer for June, PVC players moved to the sidelines. Players do not expect large PVC drops, citing tightness and producers’ statements about limited-to-be allocations. Meanwhile, there are some players who expect minor changes in case of a moderate ethylene drop in June.

A player opined, “June calls for further drops but in small sizes unless ethylene plunges.” Ethylene expectations are for €20-30/ton decreases for now, while demand will be pivotal in determining producers’ decision to apply drops in line with the half of ethylene’s outcome or beyond.
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