Europe’s PVC markets on brink of renewed hikes in March

European PVC markets stayed on a firmer note in February, although producers’ initial hike requests at par with or even above the entire monomer upsurge met buyers’ resistance. Unspectacular demand and quite comfortable availability, despite a few supply disruptions within the bloc, hindered suppliers’ margin expansion targets and increases of €25-30/ton mostly passed on deals.

Regarding March, sellers intend to maintain a firmer pricing policy and improve their profitability despite the marginal gain of €2.50/ton in the last ethylene contract. This would mark the second straight month of price increases in the PVC markets.

Poor fundamentals hamper margin recovery

European producers have struggled to recover from negative margins this month and achieved mainly increases matching or slightly surpassing the half of the February monomer upsurge. The lingering imbalance in supply-demand conditions was the main factor limiting the PVC uptrend.

Overall supply continued to exceed market needs, even after Anwil’s unplanned shutdown in mid-February. Participants reported a slight decline in resin availability in Central Eastern Europe given Spolana’s decision to discontinue its PVC production, but supply was far from being tight.

Demand still a concern

Demand did not post relevant variations with respect to January, staying on the weak side. A few buyers even noticed a slowdown due to the replenishment activities in the previous month. Converters continued to secure material hand to mouth, refraining from building stocks, despite firmer projections for March. This was due to the unpromising demand outlook for the coming term as well as quite comfortable availability.

Players test Asian PVC

More Asian offers showed up in the market as a result of sellers and buyers testing the waters, albeit for small amounts. Long lead times have failed to stimulate buying appetite so far, not to mention the unattractive prices, as they were similar to local ones. However, the possibility of an arbitrage window opening for overseas origins looms large, especially if the local market stays on a firmer note in the months ahead.

K67 from South Korea, Taiwan and China was quoted at around €900/ton DDP, with delivery in late April/May. Meanwhile, offers at or beyond €950/ton FD emerged for locally-held South Korean material in Italy.

A new round of hikes awaited in March

Prior to the March ethylene contract settlement, suppliers were expected to ask for gains mostly reflecting the entire monomer upsurge next month owing to their primary goal of margin expansion. Now that the ethylene contract settled with a tiny upsurge, hikes surpassing the full monomer cost pass-through are not excluded. A few suppliers’ limited allocations and the impending maintenance season may provide suppliers with the leverage to improve their profitability.

Yet, it remains to be seen whether the market is strong enough to support producers’ margin enhancement targets. Players hope that demand will improve in the near term as March usually marks the beginning of the high season in various sectors. However, it seems there are no signs of major changes at the moment, partly given converters’ short visibility with regards to their order entry.

In the meantime, Westlake Vinnolit has informed its customers in a letter that they will apply an energy surcharge of €60/ton with immediate effect from February 26 due to elevated power and gas prices. Yet, it is early to say if these surcharges will be able to gain traction.