PVC opens post-holiday period with new gains, demand under watch in Türkiye

Prices seem to be extending gains into the second straight month in Türkiye as initial July offers emerged with significant hikes following the Eid al-Adha holiday. Freight rally coupled with low netbacks triggered larger hike attempts than in June. Yet, concerns looming over downstream segments have caused buyers to take a cautious approach.

Swift hikes in India, elevated shipping costs fuel bullish trend

As widely expected in the previous weeks, a Taiwanese major PVC producer issued $150/ton hikes to India for July last week, while the company sold out its volumes shortly after the notification. The main culprit behind the notable increase was constantly surging shipping costs, while relatively active demand in India contributed to the upsurge. As a spillover impact, import US offers saw sharp increases in China despite a bearish local trend and accumulating domestic stocks in the country.

The news reinforced the bullish sentiment among traders in Türkiye, with initial July offers from Europe emerging visibly higher than the previous month following the Eid al-Adha break. Agents of multiple producers reported aiming for K67 deals at or slightly above the $900/ton CIF Türkiye threshold for next month, citing their low margins and rising Asian outlets as justification.

The duty-free K67 range was assessed higher at $840-900/ton CIF Türkiye, cash from the pre-Eid holiday week. Egyptian cargos posted modest hikes on the low end following early month deals at $820/ton CIF while European offers formed the high end of the market.

A two-tier market develops with wide price ranges in Türkiye

Nonetheless, the strong sentiment among suppliers has not stimulated much activity so far as Turkish buyers have not fully returned to their desks and the holiday lethargy prevails. “We started to test increases of up to $70/ton based on bulls in Asia and rising indications for ex-USG cargos. The market will need some time to absorb the new highs,” confirmed a European PVC supplier.

While most suppliers lifted their new offers in tandem with bulls in Asia, competitive prompt K67 offers cast a pall on Türkiye’s import market, limiting the gains in this week’s price assessments. The dutiable PVC K67 range edged $10/ton higher from the pre-holiday to be assessed at $850-880/ton CIF Türkiye.

Indeed, American K67 prices of up to $900/ton CIF surfaced for fresh shipments amid rising ex-USG offers. At the same time, some buyers still claimed to have received prices at $840/ton CIF for enroute or new shipment materials.

Players confirmed that US materials with old costs provided competitive options on the low end of the market, with prices at $850-870/ton FCA in the southern region. “US PVC cargos that were secured at around $730-750/ton during the bear run have arrived,” players affirmed. Adding to the scene were prompt Russian volumes from bonded warehouses as low as at $820-850/ton FCA, subject to 6.5% duty.

A trader noted, “Demand for prompt or nearing PVC has been thin due to a lack of urgent resin needs at the converter level. Besides, liquidity issues and the prolonged holiday lull kept the market under strain. We expect these old materials to diminish in the coming weeks.”

Will resin demand respond to bullish attempts?

The scene will be clearer once more players return from the extended holidays next week while demand status will be pivotal to set the extent of potential hikes on transactions.

PVC will remain underpinned by elevated transportation costs and firmer crude oil futures, not to mention firm short-term expectations in most Asian outlets. Indeed, shipping costs are projected to remain high throughout H2 2024 or even into 2025, according to some experts. Nevertheless, derivatives are yet to signal a solid pick-up in Türkiye while exports have been dampened by container issues and low FX rates, which may keep purchases tied to needs.

Sellers hope buying interest to improve in stages as some buyers may be willing to hedge against additional hikes after skipping or reducing their purchases in June now that they have resumed operations albeit at modest rates. A player said, “European suppliers may direct their cargos to other export destinations if buying appetite stays disappointing here.”

Meanwhile, the impact of a slew of trade measures by Europe and India on PVC imports is expected to be felt in the medium term. Players should keep an eye on these newly launched barriers as they will largely affect material flow across the board. A PVC seller commented, “European export volumes will diminish in the long run. This is because a lack of US and Egyptian imports will prompt regional producers to focus on their own spot markets. Meanwhile, we don’t expect to see an influx of US PVC in Türkiye unless FAS Houston prices fall drastically.”