PVC markets within Asia will strengthen this June, according to the leading Taiwanese PVC producer. As told to SSESSMENTS.COM, their sales for June shipments were pretty good, especially in India, the producer managed to sell around 30,000 tons. Bullish sentiment was supported by buyers’ assumptions that prices have bottomed out and will go up shortly coupled with minimal activity in two months earlier, as such, prompted Indian customers to buy materials and started to build inventory, SSESSMENTS.COM told.
Talking about the China PVC market, the producer shared with SSESSMENTS.COM that two main factors will drive the increase in spot prices sometime in the future. Firstly, the stimulus launched by the government to support industries targeted either the stock market or futures market. Hence, spot prices then naturally follow the trend in the futures market which showed increases in the last few weeks. Secondly, local producers, especially the non-integrated carbide-based PVC producers, which need to source the calcium carbide from other suppliers, will push their prices to go higher than CNY6,300/ton-threshold ($883/ton) to match the higher production costs. As told to SSESSMENTS.COM, the non-integrated carbide-based PVC producers account for one-third of total PVC production in China.
Speaking about their price compensation policy, the producer said that this was necessary as an appreciation of fortitude to customers who suffered losses due to huge price drops amid Coronavirus pandemic. Distribution of compensation will be provided gradually over the next few months while customers continue to buy PVC cargoes from the producer.
Regarding the outlook, the producer believes there is still room for PVC prices to further up where two main factors play. First, the ethylene price has surged by around $300/ton compared to prices in early May, yet not matched by the increase in ethylene-based PVC prices from the producer’s end, which experienced an increase of production costs by around $150/ton. Second, caustic soda has also been on a downtrend in recent weeks due to a decrease in demand in China as a result of a reduction in end-product consumption. As such, the producer will try to maximize its profit margin through ethylene-based PVC. In terms of allocation and pricing for July shipment, the producer informed SSESSMENTS.COM that the company will release an announcement by the third week of June. The producer is still not sure whether the allocation will be affected by the upcoming maintenance shutdown at PVC plant scheduled to take place from August to September.
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