China PVC rebound to be slow despite tight supply

(ICIS) -- China’s polyvinyl chloride (PVC) import prices are likely to rebound next year on the back of tight supply, but the gains may be undermined by weak downstream demand and a bearish global economy, industry sources said.

PVC prices in China began declining in mid-August and fell to an all-year low of USD 840-860/tonne (EUR 647-662/tonne) CFR CMP on 4 November. That is 31% lower as compared with the 2011 peak of USD 1,220-1,250/tonne CFR CMP seen in late May.

The downtrend in prices was due to the high interest rate in China and the tightening of its monetary policy, which restricted end-users’ cash flow and weakened buying sentiment.

However, prices rose following an explosion at Japan’s Tosoh Corp’s 550,000 tonne/year No 2 vinyl chloride monomer (VCM) line at Nanyo in Yamagata prefecture on 13 November, to settle at  to USD 940-950/tonne CFR CMP on 23 December
VCM is the key feedstock for the production of PVC.

Market players said the recent rise in PVC prices was largely because of the tightened supply as well as high feedstock VCM prices, instead of actual demand as downstream consumption in China has been persistently weak.
VCM prices have been hovering at USD 750-800/tonne CFR NE Asia since mid-November.

“The PVC price increase is because of tight supply and a cost push because of high feedstock VCM prices,” a Japan-based producer said.

Looking ahead, market participants have different opinions on the outlook for the PVC market next year.
Some market participants are optimistic about an improvement in demand after the Lunar New Year holiday in late January and said that will bode well for prices.