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Taiwanese major omits India from May PVC offers

by Abdul Hadhi - ahadhi@chemorbis.com
  • 20/04/2020 (14:35)
In a rare move highlighting the scale of reduced demand amid COVID-19 lockdown measures, a major Taiwanese producer skipped India while announcing May PVC offers to the Asian market.

The Taiwanese major - which often leads the market in setting monthly prices - unveiled $160/ton monthly decreases for May offers to Asia, with new PVC K67-68 prices at $660/ton CIF China and $630/ton FOB Taiwan.

However, the offer to India was postponed.

Demand in India - the world’s biggest PVC importer - has taken a massive hit as the country imposed large scale lockdown to curb the spread of COVID-19. With workers staying at homes or heading back to their villages, industrial activity has been brought to a near standstill causing several firms to sharply reduce operating rates or declare force majeure.

Without an allocation for India in May, market players believe the Taiwanese major’s decision to skip India will limit oversupply and partly support prices. Despite the lack of May offers, they added that Indian importers will continue to support the Taiwanese major as it had helped by extending the payment period during the lockdown.

Prices had moved lower ahead of May pricing

Import prices of PVC in India have fallen 26% from March to $695/ton CIF - a low not seen from 2009 when ChemOrbis started compiling data for this grade. Similarly, domestic prices are at 9-year lows or more at around $909/ton on ex-warehouse, cash basis.

If the $160/ton decrease had been applied to India, the May offer would have stood at $700/ton.

Nonetheless, the $160/ton decrease is not as steep as some earlier expectations. “We had expected a $200/ton cut and so, the $160/ton cut is not considered too bad,” a source at a Japanese producer said.

The lack of Indian demand has driven regional prices down as well because even China - which is recovering - can’t absorb excess cargoes. Indian imports totaled 2.19 million tons in 2019 compared to China’s 665,000 tons.

Import prices have also been depressed by low-priced US deep-sea cargoes, which are being offered around $650/ton on CIF basis. US producers are making aggressive offers as their plants come out of scheduled turnarounds and are under pressure to reduce high inventories.

Window before monsoon?

Requirements for PVC pipes are traditionally strong during the first half of the year as heavy rains during the monsoon season stretching from June to September make it unsuitable for agriculture and construction activity.

While the nation-wide lockdown has been extended to May 3, India has started to relax some curbs on agriculture and construction which may see some demand returning from this week as work resumes.

To prop up the economy, the country’s central bank cut the reverse repo rate by 25 basis points to 3.75% from 4%.

The International Monetary Fund (IMF) slashed its 2020 growth forecast for India to 1.9% from an earlier projection of 5.8% amid a sharp global contraction as COVID-19 takes a severe toll on world economies.
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