PVC price increase expectations trimmed in Asia on diving oil

Just days after predicting hikes in a $50-150/ton range for April shipments of a Taiwanese major producer, few Asian players are now out on a limb to predict the margin of price increases, in the wake of crude oil falling below the $100/bl mark.

The Taiwanese major’s monthly prices to Asian buyers are considered a benchmark in the Asian market. It was expected to notify April prices to buyers on Tuesday. “We now expect the notifications early next week, possibly on Monday or Tuesday,” an Indian trader said.

A $100/ton increase?

“Market players seem to be expecting the major to hike prices by $100/ton for its April cargoes. But we see very few firm offers currently. A different Taiwanese producer has a firm offer at $1420/ton FOB, which would translate to $1660-1700/ton CIF India, considering the current freight rates. We see CFR China/SEA prices notionally at $1450-1480 CFR,” said a Singapore-based trader.

“But FOB levels are just numbers, as the container crunch has rendered such offers meaningless. There are very few import offers now,” said the Indian trader.

Players find it hard to predict as oil prices fall

A ChemOrbis poll on March 11 had brought out expectations for the Taiwanese major’s April offers in a wide range of between $50/ton and $150/ton. However, as the resurgence of COVID-19 cases in China, the world’s biggest crude oil importer and signs of progress in cease-fire talks between Ukraine and Russia rattled energy markets, the confidence to predict prices has ebbed.

The Taiwanese supplier had raised its offers for March by $70/ton to India, and by $50/ton to China and other Asian markets, bucking a three-month declining trend in its monthly offers. Its March PVC K-67 offers are at $1560/ton CIF India and $1310/ton CFR China.

Crude oil prices have swung in a $40/bl-band over one week, with prices reaching a high of about $140/bl and falling below $100/bl lately. “There is uncertainty in oil prices as there is uncertainty in the geopolitical situation,” the Indian trader said.

Wait until next week …

“We certainly expect a hike by the Taiwanese producer, but we don’t expect it to be too steep … perhaps a $30-40/ton hike,” the trader said late in the afternoon on Tuesday. “We’d have told you earlier today to expect a roll-over, but after talking to Chinese sellers, we’re not too confident to predict numbers. Only the Taiwanese major can say with some certainty what they’d do. And it might decide on the magnitude of the increases only next week,” he said.

According to the trader, a Chinese producer was itself not too confident of offering a number for the Indian market, only saying his selling ideas for ethylene-based PVC would be $70-80/ton higher than for March cargoes.

Another Indian trader also said a $70-80/ton increase “was possible, going strictly by the current market conditions.’’ He hastened to add, “We’re not giving a confident prediction for the Taiwanese major’s April prices here.”

Buyer talk versus seller talk

Apart from the volatility in the oil markets because of the geopolitical situation, some traders pointed out that most suppliers did not have too many April import shipments to offer. “We haven’t been offered any April cargoes lately by any of the other Northeast Asian sellers, although we expect some cargoes booked earlier to arrive by late April,” said a trader. Container shortages persist in the Asian markets, slowing import arrivals and raising freight costs. “Freight costs from China to India have climbed to $300/ton and above,” a trader said.

Responding to expectation for a roll-over by the Taiwanese major, a trader in China said, “The Taiwanese prices will still go up although we can’t say by how much. Stable pricing could just be some buyer talk. But we can say the supplier may moderate its margin of increase because of the drop in crude oil prices.” Without suggesting numbers, a source at a producer in China said he expected the Taiwanese major to raise prices. A source at another producer expected overall PVC offers to rise after the Taiwanese major’s notifications.

In Indonesia, a converter said, “Domestic PVC demand has picked up, with buyers hedging against potential $50-100/ton hikes by the Taiwanese producer.” A Philippine converter also expected the same level of hikes.

But traders and converters in Vietnam expect the current uptrend in prices to be short-lived as a result of the fresh COVID-19 lockdowns in China, the downtrend in crude oil and the upcoming rainy season. “We are all very careful. Prices could still drop back as it happened last year,” a trader said.