With less than a week to go until the start of the Chinese New Year, some PVC players are voicing their expectations regarding an improvement in post-holiday demand in China, although a potential demand-driven uptrend in the PVC markets may be hindered by the ongoing off-season and Omicron-related restrictions as well as a slower economy.
What is going on in China’s PVC markets now?
After a major Taiwanese producer’s lower February offers weighed on import prices in the country in mid-January, the market activity has been limited this week with players gradually leaving their desks for the holidays. However, some suppliers who are holding firm expectations for the post-holiday season have preferred to make their move as of this week.
A Taiwanese producer slightly lifted the offers and explained, “We think that the market sentiment will improve after the long holidays due to higher operating rates of manufacturers in China.”
A few Chinese producers have also continued to adopt a stable to firmer pricing on their local and export PVC offers for the second week with support from rising Dalian and coal futures values. “We expect buying activity to pick up after the end of the holidays and push spot PVC prices higher.”
In the import market, the overall range for PVC K67 prices was flat from last week to be assessed at $1260-1320/ton CIF.
In the local market, meanwhile, spot prices were assessed flat for ethylene based-PVC at CN8800-9000/ton ex-warehouse China, cash including VAT ($1227-1255/ton without VAT) while acetylene-based PVC prices were assessed CNY100-200/ton ($16-32/ton) higher at CN8600-8700/ton ex-warehouse China, cash including VAT ($1199-1213/ton without VAT).
Export offers for ethylene-based and acetylene-based K67 were assessed $20-40/ton higher this week, standing respectively at $1280-1300/ton and $1230-1250/ton, all FOB China, cash.
Some take recovery expectations with a pinch of salt
In addition to some players at home, market players from the neighboring Southeast Asian countries have also shared their opposing views, which were more cautious about the post-holiday period considering the Omicron-hit economic outlook.
A Chinese trader said, “Demand is likely to weaken further and supply is expected to increase after the holidays amid an accumulation of stocks. Some ethylene-based PVC producers have already suspended their offers.”
A Vietnamese trader commented, “PVC prices may lose ground after the holidays as freight rates are likely to fall around 20% amid the end of the high season.”
A converter in the Philippines underlined the Omicron impact and noted, “Whether there will be an uptrend or not will still depend on regional economic recovery from the Omicron infections.”
Spillover impact of China on India, SE Asia
If firm expectations for the post-holiday period are fulfilled in China, a spillover impact on both Indian and Southeast Asian PVC markets would be inevitable.
A Vietnamese trader said, “We expect PVC prices to reverse course after the long holidays in China, boosted by high shipping costs, strong crude oil prices, and firmer monomer prices. Therefore, we may buy some to prepare for the post-holiday hikes.”
In such a scenario, demand would return to the key Indian market earlier than expected as initial expectations were calling for a potential recovery as of March in line with the start of the high season. Players have already reported a higher deal for a Taiwanese origin this week in India, meanwhile.
