Will attempts to hold PVC prices flat work in Italy and Europe?

In Italy and Northwest Europe, PVC markets have followed a stable to slightly firmer trend in October after rebounding from multi-year lows in September. Players have started to discuss if sellers’ attempts to hold onto their offers will bear fruit next month. With stable to slightly softer ethylene expectations and supply-demand imbalance weighing on projections, a breather from mild increases looks to be in the cards.

Spot K67-68 breaks below €1000 FD Italy on low end

PVC suppliers tried to reflect the cost pass-through from ethylene, 50% of €65/ton, on their October prices. However, mounting buying resistance pushed sellers to trim their initial offers and concede to smaller hikes or rollovers, squeezing producer margins.

This pushed spot K67-68 prices in Italy below the €1000/ton FD level once again. In Italy, prices were assessed at €990-1080/ton for K67-68, €1010-1100/ton for K70 and €1000-1090/ton for K58 and K64-65, all on FD, 60 days deferred payment basis. PVC prices in Italy usually trade at a premium over West European spot levels, due to its smaller market size and higher transportation costs to the south.

In West Europe, prices were assessed at €910-1000/ton for K67-68, €930-1020/ton for K70 and €920-1010/ton for K58 and K64-65 with the same terms.

PVC suppliers have rollovers in mind despite stable to softer C2 expectations

Spot naphtha prices recorded monthly losses despite sharp fluctuations in the crude oil markets as a result of the geopolitical unrest unfolding in the Middle East. Spot ethylene prices on FD NWE basis also posted decreases, widening the gap with the October settlement level. ChemOrbis data showed that the monomer contract price for October reached its highest level since March 2023. Although eyes are locked on upstream volatility, November ethylene expectations mostly call for rollovers to small drops.

However, producers may try to approach the market with rollovers as a start to avoid margin losses. Indeed, they were not able to attain 50% of the ethylene hikes in September and October. Regional suppliers also point to the rising utility costs, adding to the production costs due to high electricity usage, and caustic soda prices that moved sideways amid weak demand and tighter availability. If caustic soda prices could sustain hikes, PVC producers would be more willing to run at higher rates. Yet, this is not the case up to this point.

Will Asia’s reversal provide any support?

The recovery in Indian demand has led to an upturn in Asian markets, while reducing supplies prompted sellers both in the regional and import markets to take a firmer stance on their offers. This came after Taiwanese major’s sharp November revision that triggered stock replenishment activity amid signs of a market bottom.

It remains to be seen if rebounding prices in Asia will gain traction and will be able to prop up the sentiment in the region.

Although cheap non-European origins emerged lately, buyers refrained from purchasing these materials due to the long lead times. US PVC K58 and K67-68 were offered at a quite competitive level of €880-890/ton DDP. South Korean PVC K64-65 and K58 were at €820-850/ton DDP, meanwhile. If prices go up steadily in Asia, suppliers will focus on the region offering better netbacks. That is to say, prices at such levels may fade soon.

Players do not exclude drops

Overall availability was comfortable despite run rate cuts and turnarounds. Subdued derivative sectors kept resin requirements low, with the construction sector bearing the brunt of high inflation. Converters buy on a weekly basis due to the short visibility regarding their order entries.

Despite sellers’ efforts to prevent prices from receding, players believe that weak supply-demand fundamentals will weigh on the market, leading to small decreases as November proceeds.

As for the longer term, temporary shutdowns are not excluded if the cost pressure on producers’ side does not ease and they struggle to raise their prices.