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Taiwanese major’s Oct PVC pricing cuts surprise Asian markets

by Shibu Itty Kuttickal - sikuttickal@chemorbis.com
  • 14/09/2022 (09:50)
Asian market players have been taken by surprise by a major Taiwanese producer’s sharp $60-100/ton decrease in import PVC offers to India and China.

The new price cuts have come amid signs of demand recovering in India, the world’s largest PVC import market. Traders attribute the move to sliding freight rates as well as to inventories piling up at the Taiwanese major’s plants.

The Taiwanese major announced cuts of $30-100/ton on its October offers to Asian markets, in its sixth straight month of price reductions. The producer’s PVC K67-68 offers for October are $100/ton lower at $910/ton CIF India, $60/ton lower at $840/ton CIF China, while FOB Taiwan offers are $30/ton lower at $790/ton, with a $10/ton sweetener discount thrown in for volume buyers.

Signs of demand recovering in Indian markets

A day after the Taiwanese major notified its October offers, a South Korean producer’s shipments were offered at $920/ton CIF India.

Traders were discussing whether Taiwanese major’s offers would continue to represent the high-end in the Indian market. “Normally, its offers would straightaway be assumed as the high end in the market, but this time it’s debatable as we might soon find offers higher than that,” said a trader based in India’s commercial capital of Mumbai.

“We were expecting a decrease of up to $60/ton for October import allocations to India,” he said. “The $100/ton cuts on October prices to India have come as a huge surprise, as we’re already seeing some convincing signs of demand recovering in the Indian market,” he added.

Falling freight rates could’ve prompted Taiwanese major’s price cuts

Meanwhile, the slump in freight rates, which have gathered momentum in the past couple of months, could have played a significant role in the Taiwanese major’s price cuts.
“Freight rates have been falling at a faster rate because of China’s falling foreign trade numbers. Shipping analysts expect freights to continue falling, checking increases in import prices,” the trader said.

Nevertheless, players also felt the Taiwanese major may be looking at wooing buyers back as it knew the market was not too far from bottoming out.

Import arrivals to India keep falling

At the same time, there was a sense that supplies were tightening in the Indian market as monthly import allocations and purchases have kept declining. “August import arrivals totalled about 110,000 tons, significantly lower than normal, and September arrivals are expected to round 90,000 tons, as a result of a drastic fall in Chinese PVC arrivals,” said a domestic dealer based in the southern Indian city of Chennai.

On the other hand, a source at a Japanese producer felt the steep cuts in import prices to India and China did not reflect any pressure on regional producers currently. “The pressure on the Taiwanese producer is from its own inventories. We feel the October pricing cuts are not to compete with lower Chinese or US offers but to clear its own inventories,” he added.

Meanwhile, players continued to keep away from Chinese offers because of the safeguard duties being considered by the Indian government on Chinese PVC shipments. “Done deals for Chinese shipments to India have been limited. The proposed safeguard duties on Chinese imports has forced Indian buyers to keep away,” said a producer in China.

Japanese can’t compete with Taiwanese offers to India

“We cannot compete with the latest Taiwanese offers to India. Our offers will notionally be at $1000-1010/ton CIF India,” he added.

As Japanese imports don’t attract a customs duty of 7.5% applicable to other northeast Asian suppliers, that would be equivalent to $930-940/ton for dutiable shipments.

Indian domestic prices fall

Shortly after the Taiwanese major’s price cuts, a major Indian producer notified its buyers of a steep cut of INR4000/ton ($50/ton) on its domestic price.

The current price is noted at INR91,000/ton. Traders said they were expecting the producer to follow with its own price cuts, following the Taiwanese major, but the latest cut was deeper than expected.

India’s PVC market suffers larger losses than China, SEA

PVC – Import – Asia

ChemOrbis PriceWizard shows Indian, Southeast Asian and Chinese import prices kept falling since April as the COVID-hit economic situation in China and other regional markets kept markets weak. Currency depreciation in Asian economies also weighed considerably on demand.

Indian import prices have fallen by about 44%, while Chinese and Southeast Asian prices saw a 31-35% decrease since April. “After almost half a year of PVC prices falling, the time has come for a plateauing of the graph, if not a rebound,” a Chinese trader added.

The size of drops also caught Chinese players by surprise

Players in China were also surprised by the Taiwanese major’s latest import prices. Import and local PVC prices had followed a stable to slightly firmer trend last week with support from the oil-driven gains in the Dalian futures prices. However, demand conditions remained weak due to fresh Covid-19 lockdowns, and a heat wave.

“We were certainly expecting the producer to cut prices but not by $60/ton for the imports,” said a source at producer in China.

A source at the Japanese producer said it was matching the Taiwanese major’s import price at $840/ton CFR China. And, it would price Southeast Asian shipments at a notional $850-870/ton CIF.

“We will shortly start discussing with our buyers on the prices,” he added.

FOB China prices comparable to Taiwanese major’s FOB offers

Meanwhile, the current FOB China prices are slightly higher when compared with the Taiwanese major’s latest FOB Taiwan price at $790/ton for October, down from $820/ton for September.

A Chinese trader said, “Both ethylene- and acetylene-based shipments from China are being offered around $830/ton FOB. But we’ve also heard a deal for an ethylene-based K67 shipment at around $800/ton FOB China.”

CIF prices above $900 difficult in Southeast Asia

Southeast Asian traders said it was difficult to sell at levels above $900/ton CIF to the region. “Southeast Asian producers have considerable capacities and have been heard to be quite aggressive. It would be difficult for other origins, such as the Japanese for instance, to compete with the regional operators,” said a regional trader.

“We find regional demand has still not picked up. Unless demand strengthens, it’ll be difficult to increase prices to Southeast Asia,” he added.
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