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PVC downturn enters 7th month, prices still far from pre-pandemic levels in Europe

by Manolya Tufan -
  • 15/11/2022 (02:50)
Spot PVC prices have extended their losses into the seventh month in November, defying €35/ton higher ethylene settlement. Despite initial rollover attempts, most deals are likely to be closed lower as demand destruction and aggressive imports outweigh run rate cuts and higher production costs However, regional prices are still well above the rest of the world and pre-pandemic norms.

PVC remains well above pre-pandemic levels

Regional PVC markets have been holding onto unprecedented levels, although the weekly averages of spot PVC K67-68 prices lost around 15% since the downtrend kicked off in May. Prices reached their lowest levels since October 2021 but the prevailing levels are well above their pre-pandemic normal, needless to say. This is because spot prices recorded an eye-catching increase of 200% between June 2020 and April 2022.

As a matter of fact, this underlines that Europe remains isolated and stands well above other global markets, which moved back or beyond the pre-pandemic levels.

European PVC prices mostly hovered below the €1000/ton FD level, looking at the historical data, while average prices for spot K67-68 have been hovering around €1600-1700/ton FD level in November.

FD NWE–Italy–PVC–K67

Pricewise, deals have indicated drops of up to €70-80/ton due to the unsupportive market dynamics and deteriorating demand outlook as of mid-November. It is not excluded to see larger drops for extra quantities, as was the case in October. Yet, transacted volumes have been negligible as buyers are either covered or brace themselves for renewed drops.

Some regional suppliers have been making sharp downward adjustments for their contract customers as 2023 contract negotiations are underway. Prevailing contract levels remained unjustified, looking from a broader perspective.

 Supplies surpass demand

Supplies are more than comfortable across the region despite production hiccups. Plus, tempting caustic soda prices have helped yielding more PVC output recently. That is to say, overall supplies surpass demand even if persistently weak global PVC markets idled capacities.

Manufacturers sit on high stocks, which were secured at elevated levels. Poor order entries prevent them from securing raw materials and they keep stocks as low as possible ahead of the year-end.

A demand recovery hasn’t materialized in any sector so far this year, which is also likely to be the case in early 2023. “Demand outlook for Q1 is negative,” said several participants.

Imports see 3-digit levels, form enormous gap with locals

Demand destruction has not been the main culprit of the downtrend. Import offers with later shipment terms emerged at 3-digit numbers, curbing buying interest for local PVC to a meaningful extent. US and Egyptian prices are quite aggressive, to be precise.

In Italy and West Europe, prompt prices were last reported at around €1700-1800/ton and €1600-1700/ton FD. US PVC K67 and K64-65 were heard at around €900-950/ton CIF, with delivery in January-February.

The gap between local and import offers is at €700-800/ton, a far cry from the €100-200/ton gap appearing in the same period of 2021.

Players discuss how things will pan out

The majority of players think that PVC prices have a large room for additional drops, with aggressive imports, lengthier supplies and unpromising demand projections. Contract negotiations stay in limbo as well due to these factors. Some participants expect local PVC prices to see sharp corrections to realign with the rest of the world and import prices. One of them opined, “We did not buy US material as we expect local prices to reach these levels in February.”
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