Chinese players: Local PVC market might extent the firming trend

Domestic PVC market in China has been following the firming trend for three weeks in a row, thanks to strong futures trading and tightening domestic supply. Compared to the third week of June (week 25), local ethylene based PVC has increased CNY600-650/ton ($88-96/ton) while carbide based PVC surged CNY800/ton ($118/ton). The trend is expected to continue in the near term.

Chinese players are expecting PVC prices to surge above the CNY7000/ton ($880/ton without VAT) threshold in the coming days pointing to the fact that local supply might continue to tighten. A market source said, “Demand is healthy in China as constantly firming futures market activated arbitrage activities. Besides, it is the traditional peak season and we think more converters would return to make replenishment this week.”

However, strict environmental regulations restrain operation rate at many plants, including the upstream production, causing hike in acetylene costs. “We have no other option but to increase prices to protect profit margins amid surging production costs. There is also transportation limitation this week in Inner Mongolia, which might stretch supply in other area further,” a carbide based PVC producer said.

Besides, it is reported that Tianjin LG Bohai Chemical Co Ltd might take its 400,000 tons/year PVC unit off-stream in September for a two-weeks maintenance. This is expected to tighten ethylene based PVC availability. “Major Taiwanese producer lifted August shipment offers by $20/ton from last month and this play an crucial role in supporting domestic market,” a trader added.

However,  about CNY130/ton ($19/ton), according to CommoPlast data. Correction might take place.

At the moment, local PVC prices in China are reported at CNY6850-6900/ton ($861-867/ton without VAT) for ethylene based PVC and at CNY6600-6800/ton ($830-855/ton without VAT) for carbide based PVC, all based on EXW China, cash term.