Surplus accelerates acetylene-based PVC exports from China
“Chinese domestic prices have fallen sharply for acetylene grade, dragged down by falling futures caused by plummeting crude prices. Local producers are under pressure to export surplus volumes for their acetylene grade PVC. We have reduced export offers for March shipment,” a source at a domestic producer explained.
Acetylene-based PVC prices in China are at around $785/ton on FOB basis - their lowest since mid-2017, according to the weekly average data from ChemOrbis Price Index. Ethylene-based PVC, meanwhile, is currently at around $815/ton on similar terms.
Commenting on the competitive pricing, a Chinese trader said, “Acetylene-based PVC price is attractive and we have received many enquiries from overseas customers.”
Selling pressure has been exerted by high stock levels. While the number of fresh COVID-19 cases are becoming less in China, the business activity has yet to return to normal and resulting in a slow draw down of inventories.
The plunge in crude oil prices on oversupply worries from early last week and knock on effect on other products including PVC futures have added to the pressure on suppliers.
PVC futures on the Dalian Commodities Exchange are down CNY50/ton ($7/ton) at CNY6180/ton ($781/ton without VAT) from the start of last week, with intraday falls of as much as 3% in volatile trade.
Taiwanese major’s April offers may add more pressure
April offers by a major Taiwanese producer - which most other suppliers tend to follow - could add even more pricing pressure.
Market sources reported that the Taiwanese major’s April K67-68 PVC offers to Asian markets are down $50/ton compared to March, standing at $820/ton CIF China and CIF SEA.
To maintain a price advantage, Chinese exporters may have to further lower export offers to be competitive with Taiwanese K67-68 cargoes.
New capacities will increase supply
Despite the reduced demand, more new capacity is scheduled to come on stream this year to keep up the supply pressure on pricing.
Three new plants with a combined capacity of 1.4 million tons/year of acetylene-based PVC are due to come on stream in China in 2020, according to ChemOrbis Production database. Two of the plants have a capacity of 500,000 tons/year each while the third plant has the capacity to produce 400,000 tons/year.
Acetylene-based PVC tends to be cheaper than ethylene-based PVC as the former is mostly used in PVC pipes while the latter is used in a greater number of applications in the construction sector.
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