Following six consecutive months of increasing prices, players in China's PVC market report that the outlook for January is looking weak in spite of the recent upsurge in upstream costs. With players in China predicting another interest rate increase from the Central Bank as well as rising local supply levels following the expiration of China s electricity rationing policies at the end of the year, many sellers are feeling anxious about their prospects for the month of January in spite of the fact that importers have been reporting better than usual sales during the traditionally sluggish fourth quarter.
Much of the increase in import demand has resulted from buyers substituting import cargoes for scarce local materials. Rapidly rising carbide feedstock costs along with the government's power rationing policies have forced acetylene based PVC producers across the country to reduce their operating rates to an average of around 30-60% of capacity. With so much domestic capacity idled, PVC buyers have been turning to the import market in large numbers.
PVC producers in Southeast Asia say that they have been increasing their allocations to the Chinese market for the past several months, commenting that they have not been having any difficulty concluding deals with Chinese buyers in spite of their larger than normal export allocations. However, the government's power rationing program is scheduled to end with the start of January along with the expiration of China's most recent five-year plan, with players predicting that this action will bring a large amount of currently shuttered Chinese capacity back to the market.
While import sellers are currently still predicting a $10-20/ton increase on the initial January offers from major Northeast Asian producers, many buyers now feel that producers are planning these initial hikes merely to ensure that they will be able to secure rollovers on their done deal prices for the coming month. Others feel that these increase intentions may become untenable given the fact that offers for domestic PVC have shed CNY50-350/ton ($8-53/ton) for ethylene based PVC and CNY350-600/ton ($53-90/ton) for acetylene based PVC over the past three weeks. The rapid declines in acetylene based PVC prices were not arrested this week in spite of the fact that rising carbide costs have left most acetylene based PVC producers operating well below their theoretical costs based on spot carbide prices.
Another factor contributing to sellers'concerns over the coming month is the possibility of competition from cheaper US import offers. Although an initial January offer for American PVC was reported with a $10-20/ton increase from the December done deal level in China's import market this week, players in Mediterranean countries such as Turkey and Egypt reported receiving new import offers for American PVC with $10-20/ton decreases this week, while sources in the US reported that export PVC offers on an FAS Houston basis have lost around $10/ton over the past week.
Much of the increase in import demand has resulted from buyers substituting import cargoes for scarce local materials. Rapidly rising carbide feedstock costs along with the government's power rationing policies have forced acetylene based PVC producers across the country to reduce their operating rates to an average of around 30-60% of capacity. With so much domestic capacity idled, PVC buyers have been turning to the import market in large numbers.
PVC producers in Southeast Asia say that they have been increasing their allocations to the Chinese market for the past several months, commenting that they have not been having any difficulty concluding deals with Chinese buyers in spite of their larger than normal export allocations. However, the government's power rationing program is scheduled to end with the start of January along with the expiration of China's most recent five-year plan, with players predicting that this action will bring a large amount of currently shuttered Chinese capacity back to the market.
While import sellers are currently still predicting a $10-20/ton increase on the initial January offers from major Northeast Asian producers, many buyers now feel that producers are planning these initial hikes merely to ensure that they will be able to secure rollovers on their done deal prices for the coming month. Others feel that these increase intentions may become untenable given the fact that offers for domestic PVC have shed CNY50-350/ton ($8-53/ton) for ethylene based PVC and CNY350-600/ton ($53-90/ton) for acetylene based PVC over the past three weeks. The rapid declines in acetylene based PVC prices were not arrested this week in spite of the fact that rising carbide costs have left most acetylene based PVC producers operating well below their theoretical costs based on spot carbide prices.
Another factor contributing to sellers'concerns over the coming month is the possibility of competition from cheaper US import offers. Although an initial January offer for American PVC was reported with a $10-20/ton increase from the December done deal level in China's import market this week, players in Mediterranean countries such as Turkey and Egypt reported receiving new import offers for American PVC with $10-20/ton decreases this week, while sources in the US reported that export PVC offers on an FAS Houston basis have lost around $10/ton over the past week.
