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Tightness drives European PVC market up, prices near pre-pandemic levels

by Manolya Tufan - mtufan@chemorbis.com
  • 14/09/2020 (04:11)
The uptrend in Europe’s PVC markets gained momentum in September amid a spate of production outages and lack of imports. This along with better-than-anticipated demand in local and export markets reduced regional availability considerably.

Supply shortages reinforced bullish rally in Sept

PVC prices reversed the course in June and have steadily risen since then to hit pre-pandemic levels.

The pace of PVC gains has accelerated as a result of supply shortages and September PVC deals across the board have started to be closed with visible increases of €40-50/ton despite flat ethylene settlement.

Buyers consent to large hikes amid a dearth of PVC

On the supply front, imports have been choked off amid force majeure declarations in the US. Meanwhile, Inovyn’s force majeure declaration has rattled the market that is suffering from low PVC supply levels amid ongoing production outages across the board.

A spate of maintenances during September-October has already drained PVC availability in the region. Some producers put their customers on allocation before their maintenance shutdowns. Plus, production hiccups at VCM plants have also affected PVC production.

Apart from that, stock levels on the PVC suppliers’ side has been already low since June amid boosted export sales and healthy domestic demand. As a result, suppliers reported a significant increase in price inquiries, with some of them skipping export markets for the month.

Sellers affirmed, “Buyers, who could not obtain allocations from their regular suppliers, consented to pay increases we asked for.”

End markets support bullish rally, construction is still the bright spot

One of the reasons contributing to the bullish run was steady growth in PVC demand as packaging and medical applications have been the best-performing segments since the start of the pandemic. This was fueled by buyers’ restocking needs in the post-lockdown period.

The recovery in the pipe and profile sectors that began in line with the reopening of construction sites has become one of the key drivers of the uptrend. Construction industry has shown a strong performance both due to the seasonality and government incentives on the building sector and infrastructure projects from June onwards.

DIY businesses have also been performing better for the past couple of months as a result of changing consumption patterns.

Players in Northwest Europe noticed better than expected demand during August. Some converters in Southern Europe also shortened their vacations to compensate for the lockdown losses. As a result, demand was stronger when compared to August 2019.

Nevertheless, some converters continued to buy conservatively depending on the sector, keeping their stocks low to align with their run rates. Tightness was exacerbated once they came back to the market to meet their needs. A player argued, “Even irregular customers called to ask for material. We receive many inquiries that we are unable to respond. Most suppliers have no extra volumes.”

Global tightness supports October outlook

According to sellers, PVC tightness is not likely to ease in the near term amid ongoing production outages in Europe, the US and Asia. Moreover, Asian PVC markets indicate another round of strong increases for October. This in turn is expected to support European market as well.

That is to say, early October expectations suggest that the PVC uptrend is unlikely to falter despite lower crude and spot ethylene prices particularly if supply-demand dynamics remain unchanged.
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