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Will major PVC markets hit bottom for June?

by Merve Sezgün - msezgun@chemorbis.com
  • 07/05/2020 (05:52)
With PVC prices across major Asian and Mediterranean markets hovering around their lowest levels in more than a decade, players’ discussions have moved to whether a price bottom might be nearing in line with possible easing of lockdowns in non-China countries.

Asian players shift focus to June after wrapping up May deals

Players in Asian PVC markets have shifted their focus to June after largely wrapping up their May business with three-digit drops from April, led by a major Taiwanese producer’s $160/ton price cut.

Bottom talks start in India despite lockdown

PVC prices in India continued to show weakness this week with overseas and local suppliers approaching the market with aggressive offers.

Demand from the world’s largest PVC importer has taken a sharp knock from the COVID-19 lockdown, which has been extended to May 18.

However, the impending relaxation of the lockdown has prompted talks that the market may be near a bottom. These talks have also been supported after price increases were heard in neighboring Pakistan. According to a few traders in the country, PVC offers from the US were up by $30-40/ton from last week.

Players in India opined, “Another factor is a window between the end of the lockdown and the arrival of the monsoon in June for some aggressive economic activity.

Restrictions on key sectors such as agriculture and public utilities as well as ports have already been relaxed but labor shortages have hindered full scale work. Still, there could be opportunity for PVC suppliers if the lockdown is eased and the monsoon arrives late.”

However, according to players, the return in demand would be slow and gradual as the monsoon arrives in June and will hamper agricultural and construction activity.

China is still the bright spot

Local PVC K67 prices in China maintained a stable to slightly firmer trend as the market returned after the five-day Labor Day holidays over May 1 to May 5.

“Demand has been gradually improving since China started to ease lockdown measures last month. There are still competitive import offers for several Asian and deep-sea origins in the market. For US K67, sellers were reluctant to give further discounts as deal levels were stable on the week at $590-600/ton CIF, cash,” a trader commented.

A source at a Japanese producer said, “The market is awaiting news from the Taiwanese major for June contract pricing and there is speculation of a price increase into China, which is the largest consumer now.”

SEA expected to replicate the recovery in China

Players are looking to Southeast Asia to replicate the demand recovery in China in line with the easing of the lockdowns.

Vietnam lifted its lockdown two weeks ago while Malaysia has recently eased COVID-19 related restrictions.

“The relaxation of lockdown measures has given hopes of demand improving and downstream production rates rising. The optimism also suggests that PVC prices may have seen a floor in the short term,” players explained.

A source at a Southeast Asian producer added, “Lately, we see some improvement in demand in almost all countries after easing lockdowns and so, the price for June is mostly likely to be higher.”

Winds of change also blowing in Mediterranean markets

Besides Asia, players across Mediterranean markets have also started to feel the winds of change blowing for PVC, particularly the US origins.

Downward trend loses pace in Turkey

Import PVC prices continued their downward trend, yet the pace of declines slowed down as players started to question whether or not the import market neared the bottom following sharply lower May offers.

“European PVC prices were stable to slightly lower on the week, while US producers did not sound to reduce their offers anymore. The bottom level seems to be near for US PVC,” noted traders.

Meanwhile, a large manufacturer based in Turkey also commented, “Domestic PVC demand in the US is not bright. So, we asked traders why US producers are reluctant to reduce their offers for next month.

They explained it as limited material owing to restocking activity by Middle Eastern, European and Asian buyers, adding that prices might shift direction in June.”

Hike attempts for US PVC emerge in Egypt

In Egypt, offers for US PVC K67 moved below the $600/ton CIF threshold earlier in the week, with a trader saying, “We sold most of our allocations at around $580-600/ton.

This might be the lowest buyers can get.” According to most sellers, there is a good chance that the market has found the bottom.

Supporting these comments, some hike attempts surfaced by the middle of the week. A trader who offered US PVC K67-68 at $640-650/ton said, “We decided to push for increases so as to stop pricing going further below the $600 threshold.”
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