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Will initial hike attempts for PVC work in Italy and West Europe?

by Manolya Tufan -
  • 09/04/2024 (02:32)
Regional PVC markets had rebounded from a 3-year low last month after remaining flat in the first two months of the year. Prices seem to have extended gains into the second month in April, with increases emerging beyond the half of the ethylene hike. Participants flag that current market dynamics will not support margin recovery targets.

Producers aim to recover margins

Most suppliers revealed their fresh offers later than usual given the lingering holiday lull and delayed settlement of ethylene contracts. PVC producers are approaching the market with renewed hike attempts surpassing the half of the ethylene settlement or matching the entire ethylene hike. This is because sellers prioritize margin recovery intentions.

A major supplier already sought increases matching the monomer hike of €40/ton to recoup margins. A producer source commented, “PVC prices will surely rise amid higher feedstock prices. The market feedback is not clear as negotiations have just started. If our initial hike requests see resistance, we may divert them to the export outlets in Türkiye and North Africa, where prices on the upper ends match European prices on the lower ends.”

As negotiations are underway in the spot market, buyers are likely to wait until all pricing policies are settled before deciding to replenish.

Demand to have the final say

Purchasing activity may remain sluggish as there are no signs that derivative sectors are on the mend, with automotive and construction sectors witnessing slower consumption. The high season has not kicked off yet, while it remains of utmost importance for players to maintain vigilant monitoring of demand. If April will be characterized by hand-to-mouth purchases, it will be hard to recoup margins and achieve hikes beyond the cost pass-through from ethylene. According to some sources, demand may improve from June.

Converters are likely to push for increases in line with the half of the ethylene’s outcome, citing lukewarm demand and sufficient availability within the bloc. Demand is so low that we need to cut our end-product prices to sell, as a compounder put it.

A player said, “Increases of €20/ton may pass on deals at the end, as was the case in March.”

A trader reported, “We expect regional suppliers to issue increases of €40-50/ton in the first place but smaller increases will pass on deals amid waning demand due to the holidays and arriving imports.”

As a side note, a converter finding hikes in line with the entire ethylene upsurge unjustified remarked, “If suppliers apply larger gains than in the contract market, the gap between the spot and contract markets will widen.”

Supplies are there despite output curbs

Indeed, suppliers see no support from reduced import volumes or regional production hiccups. Overall supply has been enough to meet the requirements from the regional and export buyers regardless of run rate cuts and some maintenance shutdowns in early Q2. As producers suffer from tight margins, they are running at reduced rates to avoid further erosion in their margins.

A market source opined, “Supply is enough to cover demand despite lower import availability and some production issues within the bloc. If supply remains comfortable, it will be difficult to recoup margins.”

US PVC retains competitiveness in Italy

Prompt US PVC cargos for K70 and K64-65 were offered at around €900-920/ton FD Italy, 60 days, standing well below the spot ranges. As they undercut their prices, it may be difficult for regional suppliers to boost their margins. This is because some buyers contemplate buying US PVC providing that prices remain competitive and delivery terms are not that long.

Growing competition among sellers has been a pressure point in export markets as well. US traders sell more material at aggressive levels to compensate for their loss in Europe amid the ongoing antidumping probe. Regional sellers failed to lift their export prices further.

A player said, “US producers may be looking for new outlets as demand wound down in their back yard, LATAM, and supplies are more than comfortable.”

Meanwhile, spot PVC grades on the low ends centered at or above €950/ton FD Italy threshold. Price assessments stood at €950-1020/ton for K67-68, €970-1040/ton for K70 and at €960-1030/ton for K58 and K64-65, all on FD Italy, 60 days basis.

In West Europe, prices reached €870-940/ton for K67-68, €890-960/ton for K70 and €880-950/ton for K58 and K64-65 with the same terms.
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