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US PVC may face exodus from Europe; trade flow shifts and rising competition to ensue

by Manolya Tufan -
by Esra Ersöz -
  • 07/12/2023 (11:57)
Overall PVC exports from the US rose by 35% on a yearly basis in the 9 months of 2023 to hit around 2.3 million tons. The major global markets saw uninterrupted supplies from the US, with exports already exceeding last year’s figures. As there is a probe on US PVC initiated by the EU, let us have a look at the statistics and internal dynamics of importing countries that would have a say on trade flows.

A closer look at the latest export statistics

The US shipped a good amount of PVC volumes to the major global markets during January-September period of this year.

Strangely enough, exports to Canada fell by 14% on the year during the first 9 months. Despite the yearly drop, Canada preserved the lions’ share. Even though exports to Mexico rose by a meagre 9% at the time, it remained as the second largest buyer of US PVC.

Whilst US PVC exports to South American countries, normally a backyard for US cargoes, mostly fell on the year, US boosted exports to the other parts of the world, as can be seen in the below chart.

Exports to the world’s largest PVC buyer, India, showed an outstanding fivefold increase on the year in the first 9 months. Brazil has been the only country in South America where exports rose by more than fourfold albeit at comparatively smaller volumes, despite the ongoing import measures for US cargoes including antidumping duties and tariff quotas. Exports to the United Arab Emirates, Vietnam, the EU27, China and Türkiye also witnessed eye-catching increases. While exports to Egypt showed a yearly loss of 31% during this timeframe, Algeria showed up in the list.


Where will US PVC head amid supply glut and anaemic demand?

Following the probe that started across the EU, the attention has turned towards possible scenarios regarding how trade flows would change. Despite a substantial growth in the market share for US suppliers, the EU27 is not one of the largest PVC consumers. To put it into perspective, US exports to the EU constituted only 9% of the cumulative exports during January-September 2023 period. Even though the union’s part is relatively small in terms of consumption, players wonder where US PVC cargos will flow into if European buyers decide to phase out their import purchases from the US.

European PVC producers to find some relief

Speaking of projections about the process, European buyers shared divergent views. Some players underscored that the investigation may not take as long to be completed and the result may be clear later in H2 2024. The probe is originally expected to last around 13 or 14 months, while provisional measures can be introduced by May-June 2024. Even though some participants even believe that an antidumping duty will not be applied, some buyers have already started to shy away from US PVC imports. A seller affirmed, “Buyers cannot decide whether to secure import PVC after the probe was initiated. A lack of assumptions about the magnitude of a potential duty added to uncertainties.”

A pipe maker remarked, “We are skeptical about the implementation of a duty especially on US PVC. However, we are cautious with our purchases as buyers may have to pay for an AD duty, if applied, by the time these cargos arrive.”

On the other hand, European PVC producers – who have slashed their operating rates for almost two years in a bid to counterbalance chronically low demand with excessive supplies – are likely to find some relief as a certain amount of import supply will exit from the market gradually, creating them space for less competition and more price advantage.

Will India have more appetite to buy?

Indian PVC markets buckle under an influx of Chinese cargoes despite safeguard investigation being in place since September 2022. China remained the leading supplier to India , holding a share of 35% in India’s cumulative imports during the first 3 quarters of 2023. Plus, China increased its exports to India by 80% from the same period of last year. This is interpreted as a reflection of a staggering property sector and excess capacities in China coinciding with the slow post-Covid demand recovery.

The US’ share in India’s cumulative imports was relatively smaller than China, with around 9% through the first 9 months of 2023. However, US PVC imports of around 211,000 tons jumped considerably from last year. US PVC is already subject to 7.5% customs and 39% AD duty in India.

Indian market has been growing and the demand outlook remains promising due to the ongoing infrastructure works and soaring young population. A fight for market share is not off the table, with India promising growth versus PVC supplies getting lengthy at global suppliers. In 2024, China prepares to introduce 1.8 million tons of S-PVC. While the US plans to add 380,000 tons of new capacity, India also plans to start up a small capacity of 35,000 tons next year.

Price competition between Chinese and US suppliers on doorstep

According to statistics, Chinese exports to all ASEAN countries dropped on the year in the first 3 quarters of 2023. However, US PVC exports to the regional markets were up by 150% during this timeframe.

Pricewise, US PVC offers are not offering a competitive edge against Chinese PVC as prices nearly stand at par. Vietnam has borne the brunt of excess polymer stocks in China as it is the closest outlet. Ethylene-based K67 offers from China mostly formed the low ends of Vietnam’s import ranges.

That is to say, US suppliers will confront the competitive pressure from Chinese material in India and Southeast Asian markets. Global markets are not expecting a meaningful recovery in downstream sectors during the first half of 2024 at least. Hence, it will not be wrong to say that a price war lies ahead.

How about China?

In January-September period, China’s imports from the US displayed a remarkable spike but this is mostly due to base effect following rather limited import volumes recorded in respective period of previous years

China is indeed a net exporter of PVC thanks to its installed capacities of 25 million tons, 80% of which is for coal-based acetylene production. US PVC’s market share is not likely to grow at this pace going forward, bearing upcoming capacity additions and murky demand outlook in mind.

Eyes on Turkish manufacturers’ approach

In Türkiye, players have also been voicing their opinions about the unfolding issue in nearby Europe as it will have an impact on trade flows in case of an AD duty. A source from a European supplier said, “We do not expect to see any substantial changes in our export allocations to Türkiye.”

Before trying to answer the question of whether US suppliers will boost exports to Türkiye, it may be better to point out that Turkish players are wary of an increase in imports from Egypt instead of the USA – as the same probe has also been initiated for Egyptian PVC dumping in Europe – given its proximity and duty advantage within the scope of the free trade agreement.

In the first 9 months of 2023, Egypt accounted for 15% of Türkiye’s PVC imports, standing as the second largest import supplier. Meanwhile, Türkiye imported around 150,000 tons of US PVC in January-September 2023, while the US was at the top of the list with 20% of the total PVC imports through the first 9 months.

US PVC is subject to an antidumping duty of 32.93% and a customs duty of 6.5% in Türkiye. Turkish manufacturers are able to import American PVC under an inward processing regime to be exempted from these duties when they export their end products to the destinations of the same tariff category. Hence, the US continued to be one of the major suppliers to Türkiye as re-exporters heavily count on this origin.

However, the slowdown in end-product exports particularly for profiles, driven by the global stagnancy, is highly likely to keep the interest in US PVC imports low, considering the cost burden it would put on converters if they cannot use their inward processing certificates for US imports.

Will US PVC find its way back to backyard?

Having lost its share in most South American countries, US PVC is likely to return to these markets as its closest outlets. Mexico will continue to be the particular focus for US PVC while Peru, Colombia and Guatemala may see more US PVC cargoes re-emerging in the near term.

African countries particularly Algeria may also stand out as an alternative export destination for US PVC; however, relentless economic struggles keep consumption low in the continent.
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