Snow in Asian PVC summer; April offers might journey south

It was just several days ago that players across Asia expressed high expectation for $20-30/ton hike on April shipment offers from a major Taiwanese producer. And this week, market flipped upside down when it becomes clear that demand in India and China is not supporting enough.

Chinese players reported surging inventories level in the domestic ground, defying expectation for better demand condition after the long Lunar New Year holidays. “We have to offer another CNY100/ton ($15/ton) discount from last week in order to attract buying interest. We hold strong hope for the near-term outlook, in the meantime, watching for development in the international ground,” a trader said.

Demand in China is recovering in a slow pace as many converters in the country are suffering from the insufficient workforce, yet, government’s plans on revamping the country toilet system leave the positive expectation to linger in the sentiment. In the meantime, traders are actively offering to export market to reduce inventory pressure.

In India, hope for a strong rebound in demand was technically dimmed as importers are now over-occupied with the latest ban on the issuance of Letter of Undertaking (LoUs). To make the sentiment softer, a major local producer decided to throw a discount scheme of IN1500-2250/ton ($23-35/ton) depending on the purchased quantity to discourage interest on import materials at the time switching financial instruments would cause huge burden.

“And therefore, we think it is very unlikely that overseas suppliers would introduce fresh hike as it would drive buyers to more competitive parcels in the local ground. The reduction also reflected below-expectation demand condition in the country,” an Indian trader commented.

In the background, PVC export offers from major USA producers have been moving lower for two weeks in a row. “And this might the tone for April,” another Indian buyer added.

However, firmer upstream ethylene costs and tightening supply from Japanese and South Korean suppliers due to on-going maintenance shutdowns might limit any possible deep plunge in April offers, sources said.