European PVC downtrend set to deepen in July

European PVC prices have continued to edge lower in June amid weakening fundamentals. While suppliers initially attempted to limit reductions to half of the June ethylene outcome, mounting sales pressure, sluggish demand and increasingly competitive imports from Asia forced sellers to concede to larger concessions of mainly €50/ton as the month progressed.

According to ChemOrbis Price Index, the spot PVC market - which surged nearly by 60% during the war-driven frenzy from March to mid-May and hit 3-year highs- has so far eroded only by 5-7%.

Thus, the PVC downturn is expected to accelerate in July as participants project up to three-digit drops in the next ethylene contract while buying appetite may slow down further owing to the summer holiday period.

Sales pressure mounts during June

Producers increasingly struggled to defend their margins given buyers’ limited purchases to immediate requirements amidst weak consumption despite the traditional peak season for construction-related applications and converters’ comfortable stocks. Hence, suppliers applied discounts of mainly €50/ton during the month, matching the full ethylene reduction.

Meanwhile, growing sales pressure led to the emergence of increasingly competitive spot offers of European PVC during June, although they were generally linked to additional spot volumes. This highlighted the growing willingness of some sellers to grant discounts in order to stimulate demand.

Demand disappoints, supply is not a concern

Despite the lingering force majeure at Westlake Vinnolit’s Knapsack and Cologne sites and Anwil’s planned maintenance, overall supply remained sufficient given poor consumption and ongoing destocking activities. Converters reduced inventories not only of high-priced PVC stocks secured during the market spike following the Middle East conflict but also of finished goods. At the same time, end-customers were at a standstill, limiting purchases in anticipation of lower prices.

Imports gain further ground despite cautious buying

Import competition continued to pressure the market in June as the arbitrage window from Asia widened further despite elevated freight costs. Indeed, fresh import offers for September arrival continued to undercut domestic material across both Southern and Western Europe. Chinese PVC was quoted at around €840/ton CIF while the South Korean origin was assessed between €840-850/ton CIF and €900/ton CIF, depending on destination.

Despite the attractive pricing, buying interest remained cautious. Many converters expressed concerns that import cargoes arriving in August or September may lose part of their cost advantage if European prices continue declining over the coming months. Hence, some buyers therefore preferred to wait for additional reductions in overseas offers rather than commit to new purchases. At the same time, re-emerging discussions about potential anti-dumping duties or other trade-defense measures against overseas origins added to cautiousness.

Different price levels, meanwhile, showed up for Mexican material as a result of additional downward revisions emerged during the month for larger-volume negotiations in an attempt to spur sales.

Doors to US PVC to remain closed despite the imminent agreement taking effect

On June 17, the European Parliament approved the EU–US tariff agreement, the marking a significant step toward eliminating EU import duties of 6.5% on a wide range of US industrial goods, including plastics under Chapter 39. The legislation has still to receive the formal approval from the Council of the European Union, which is expected soon, and be published in the Official Journal before it enters into force.

Although PVC is included in Chapter 39 to benefit from duty-free access for US cargoes into the European market, the anti-dumping duties of 58- 77% applied by the EU on US-origin PVC are likely to keep the door closed.

July outlook turns sharply bearish

July expectations point to a significantly steeper decline in PVC prices compared to June. Market participants anticipate a triple-digit reduction in the July ethylene contract owing to the sharp drops in feedstock and energy markets after the US-Iran ceasefire. Erasing a large portion of war-driven gains, European naphtha now stands 10% above pre-war levels while European spot ethylene is only 7% above the pre-war levels, according to ChemOrbis Price Wizard.

Even though producers are projected to reflect half of the awaited monomer cut to protect their margins, some players believe that competitive pressures may force larger reductions and triple-digit decreases may become increasingly common in negotiations, particularly if suppliers seek to secure volumes before the summer slowdown intensifies.

Meantime, demand is likely to remain muted amid summer holidays, continued destocking efforts and weak consumption across key downstream sectors. Supply, meanwhile, is expected to be sufficient to cover market requirements.