Europe’s PVC prices remain firm in March; will markets take a breather from increases in April?

European PVC prices extended their gains into the second straight month in March amid producers’ margin enhancement targets, despite the marginal upturn in the last ethylene contract. Suppliers’ larger hike attempts, however, met buyers’ resistance as market conditions did not witness a major uptick over the last month, with demand defying seasonal patterns.

Meanwhile, players started to question the feasibility of renewed gains in April, with some of them anticipating stability or even small reductions on the heels of weaker crude oil and naphtha markets.

Suppliers improve margins slightly, albeit with difficulty

Producers opened the month with increases well above the full monomer outcome due to their primary goal of margin expansion. Larger hike requests of up to €60/ton faded soon as the market was not able to absorb such gains. Indeed, fundamentals were not supportive, although availability was lower across the region amidst some supply disruptions and the maintenance season.

Whilst hikes of up to €20/ton passed on deals, buyers have been resisting to larger gains of €30/ton, citing steady demand and their difficulties in passing on higher resin prices to their end-product prices.

Unspectacular demand limits PVC uptrend

Even though the high season for several PVC applications usually starts in March, converters have not seen any relevant uptick in demand from the previous month. Consumption of finished goods remained poor while buyers’ visibility with regards to their order entries was still short.
This pushed converters to keep purchases tied to their basic needs. In the meantime, bad weather conditions were cited as another factor curbing buying appetite in the building and construction sectors.

Weaker dollar fails to spur buying interest for imports

After the US dollar lost its strength, overseas PVC offers surfaced slightly lower, particularly from Asia. Yet, buyers’ interest towards long-distance cargoes remained thin given the reduced gap with local prices and extended lead times. On top of this, a potential stability or even softening in the European market for next month dampened import buying appetite further.

Offers for South Korean and Taiwanese K67-68 were reported between €880/ton and €930/ton on DDP basis, while locally-held K67-68 prices for Asian origins were quoted at €940-960/ton FD. Mexican material, in the meantime, was dealt above the €900/ton DDP threshold.

What’s in store for April?

Monthly drops in spot naphtha prices and the volatility in the energy complex may pave the way for a softer outcome in the next ethylene contract. This, coupled with possibly unchanged market dynamics, is likely to prevent additional hikes in the PVC market in April, although a few producers might attempt for some increases early in the month. Suppliers may try to keep their prices steady in case of a slight drop in the April monomer settlement, considering that margin expansion remains a priority.

On the contrary, some discounts may show up in the PVC market if the ethylene contract settles with larger decreases and the sluggishness of demand persists, albeit in small amounts owing to producers’ lingering profitability concerns.

Indeed, they have failed to push prices back to the profitable levels yet due to the ongoing supply-demand imbalance in global markets. According to the weekly average data on ChemOrbis Price Index, spot K67-68 prices on FD Italy and NWE basis posted cumulative increases of only 4-5% since late January.