Asia Weekly PVC Overview (Week 41, dated 9-13 October 2017)

November offers expected with reduction, local China market plunge

In Asia, players are waiting for major international producers to announce November shipment offers. However, with demand in India remains slower than expected while domestic market in China plunged in the post holiday term, market is mostly looking at softer trend ahead.

In India, buying interest sees little movement though the monsoon season has come to an end. Market players are blaming the holiday sentiment ahead of the Diwali festival to be the main reason fuelling the persistent suggish condition. “However, the root cause is that buyers are unable to accept the current offers from Fareast Asian suppliers given the available of competitive local, Japanese and Russian cargoes. Profit margins remain squeezed in the after match of GST implementation,” an Indian trader commented.

It appears that international suppliers have not completed selling October cargoes to India, market sources said, and discounts are emerging for even small quantity on both South Korean and Taiwanese cargoes. “We do expect a delay in new price announcement given the up-coming Diwali holidays. With the current demand condition, any hike is very unlikely, however, we are monitoring to see if prices could go down,” a trader commented. Other sources are discussing a possibility of a drop as much as $40/ton for November shipment offers.

Meanwhile, Chinese players returned from the long National Day holiday to witness a deep reduction in local PVC prices for both ethylene and carbide based cargoes. Latest market levels indicated CNY300-400/ton ($45-62/) reduction from the pre-holiday term, due to weaker than expected demand. The ban of major construction works in the capital city – Beijing from 15 November 2017 to 15 March 2018 affected demand to a certain degree, players said. The ban includes all constructions of road and water projects, as well as demolition of housing. A producer said, “Surprisingly, post holiday demand is much weaker than expected. We give a room of another CNY200/ton ($30/ton) for negotiation, and still face difficulties to attract buying interest. Situation might worsen if futures market continue to follow the soft trend.” The situation might put more pressure on the PVC market in November, as overseas suppliers are about to announce new prices.

Demand in Southeast Asia is rather steady and with bearish indications emerged in India and China, buyers are just withdraw to the sideline, waiting for clearer direction. “We are waiting for new offers from major Taiwanese producer before making decision. Chinese suppliers might start offering to export market in the coming weeks since domestic market is no longer attractive. Prices might slip below the $900/ton threshold,” a Vietnamese trader commented.