For the Quarter Ending September 2023
The Polyvinyl Chloride (PVC) prices exhibited a positive momentum in the quarter ending September 2023 and were primarily governed by the limited stock availability. In August 2023, the United States PVC market faced a significant supply squeeze due to planned shutdowns and maintenance at major PVC plants. This led to a PVC price hike, causing concerns about price volatility. Notable players impacted by these disruptions include Formosa Plastics, with a 753,000 MT/yr production capacity plant in Texas closed for maintenance in August, and another 536,000 MT/yr unit in Louisiana undergoing maintenance in September. Westlake Chemical Corporate also temporarily closed its 725,747 MT/yr VCM plant in Louisiana in September, affecting downstream PVC production. Shintech, a major PVC producer, planned a shutdown of its 890,000 MT/yr unit in October for maintenance. Towards the end of the quarter, September 2023 PVC prices remained stable due to reduced demand from the construction industry amidst weak purchasing enthusiasm in the region market in the line of limited produced inventories. Additionally, A UAW strike affecting major automakers’ production also contributed to decreased PVC demand in the USA. Additionally, the construction sector's demand dropped since August, affecting PVC's future market transactions in the last quarter of 2023.
The PVC price trend in the quarter ending September 2023 witnessed an overall upward trend in the APAC region amidst increased demand from the construction sector and robust market activity in the middle of quarter 2023. The surge was fueled by multiple factors, including expectations of a significant boost in the downstream construction demand, and resulted in heightened offtake across regional markets. Meanwhile, the supply-side scenario was dominated by escalating Calcium Carbide prices in China and soaring crude oil costs, as a ripple effect constricted PVC production rates and created a bullish market environment. The impact of a disruptive typhoon event in August 2023 in China exacerbated supply challenges, resulting in constrained regional PVC availability. In response, market players raised prices to safeguard their profit margins, coinciding with a surge in international offers. However, toward the end of the quarter, PVC prices took a turn in the southward market momentum amidst stability in demand and ample stock availability backed by the stagnancy in the procurement activities in the construction industry of the APAC region and sufficient stocks compelled the traders and manufacturers to stabilize their quotations in the domestic as well as in the international markets at the termination of September 2023.
In the quarter ending September 2023, the European market witnessed a relatively downward momentum of the PVC price dynamics. With regional participants returning from their summer holiday, a cautious resurgence in pre-purchasing activities occurred, briefly keeping PVC prices at a modest low. August's earlier construction industry woes, fueled by high interest rates, had cast a shadow over PVC consumption in the first half of the quarter third. The upstream EDC prices inched upward, mirroring the surge in crude oil futures, thus adding cost pressures for PVC producers. In the middle of the quarter third, mounting inflation further complicated production concerns, prompting the ECB to make one last interest rate hike to counter inflationary pressures. Amidst these challenges, PVC sellers in September 2023 found renewed optimism. While the spot market initially lacked strong buying incentives, the necessity for restocking and attractive import prices reignited buying interest. In contrast, the PVC market had seen marginal changes in the September prices due to steady downstream demand, consistent international inquiries, and low inventory levels. A pause in Central Bank interest rate hikes aimed at taming regional inflation, coupled with domestic buyers adopting a wait-and-see approach, led producers to reduce inventories at lower profit margins. Economic and geopolitical uncertainties, along with tightening financial conditions, had stifled demand, with the economic sentiment index witnessing a gradual decline in the Eurozone during this quarter.
Middle East Asia
The fluctuations in the PVC prices in the quarter ending September 2023 recorded resilience in the Middle East Asian region and resulted from the mixed downstream market situation. In Saudi Arabia, the prices of PVC have been upward since the start of the third quarter of 2023, due to rising international offtakes amidst a shortage of supplies with the rise in the upstream crude oil costs. Moreover, from the domestic demand perspective, the PVC downstream demand was strong in the construction industry amidst the booming construction segment along with improved PMI in September 2023 in Saudi Arabia. As per the latest insights, the input price inflation for PVC increased in line with higher crude oil prices and elevated the cost pressure on the manufacturers to drive up the prices and pass the cost burden to the consumers. The output charges rose at a further upward rally throughout the month. Moreover, the CPI in Saudi Arabia increased by 2.0% as per the August data and further, the PMI seems to be improving amidst reviving business sentiments in the country as the PMI (Purchasing Managers Index) recorded 57.2 points as per the latest Saudi data of September 2023.
For the Quarter Ending June 2023
The PVC prices followed a downward trajectory in the quarter ending June 2023, backed by the persistently sluggish demand in the region's construction sector. The decrease in sales and profit for the producers reflected the challenging global economic environment, along with macroeconomic factors weighed on the commodity performance this quarter. In the H1 of Q2, supply chain disruptions and inflationary pressures affected the downstream packaging industry. Furthermore, despite production issues faced by major producers, including Formosa Plastics Corp. USA and Westlake Corp., PVC demand remained muted. The weak demand was primarily attributed to a slowdown in residential construction in the region due to elevated interest rates by the Fed to limit inflation in the United States at the start of Q2. These restrictive financial conditions and inflation has paused the consumer purchasing power in various sector and conclusively influenced PVC price discussion in the US market. At the end of the quarter, the US Department of Homeland Security (DHS) banned the inflow of Chinese imports to keep forced labor practices out of the US supply chain, and this ban impacted the PVC prices, and market players stabilized the prices toward the end of June.
According to the latest data, PVC prices exhibited a downward trend in the quarter ending June 2023 in the APAC market. The market participants were concerned about the gloomy demand in the construction and packaging sector of the country. The inadequate revival of the economic condition in China deprived the consumer buying enthusiasm in the domestic market, and sluggish offshore trading activities further affected the pricing movement of PVC in this quarter. Moreover, the volatility in the upstream crude oil prices and lower feedstock Calcium Carbide supported the price decline for PVC in Q2. However, manufacturers opted to reduce production run rates in the face of bearish market transactions in the H2 of the Quarter. In the H1 of Q2, the downstream processing industry deteriorated following the Holiday season. Moreover, the export demand slumped, and rising interest rates weighed on the construction sector offtakes across the regional market. Traders continued to experience oversupplied market since the Labour day Holidays in May 2023 and the drop in crude oil costs and feedstock Calcium Carbide prices.
In Europe, PVC prices were low in the quarter ending June 2023, backed by the lower offtakes in the downstream sectors, including the construction and packaging segments. The major factor influencing PVC pricing dynamics was a steep decline in construction offers and ample availability of inventories as interest rates continued to increase and weighed on consumer spending throughout the quarter. The market players closely monitored market conditions and adopted strategies to navigate this period of decline amidst financial stress by reducing production rates, focusing on balancing costs and maintaining a stable supply chain. Meanwhile, the reduction in the feedstock EDC prices and upstream Ethylene costs also supported the decline of the prices during this time frame. The slowdown in the global economic condition resulted from persistent repercussions such as restrained investment, increasing debt vulnerabilities, and shortages in funding in the regional market and conclusively diminished the construction sector demand for PVC. Therefore, the PVC prices were assessed monthly declination nearly 6% in June 2023.
Middle East Asia
The PVC price trend in Saudi Arabia was down in the quarter ending June 2023 due to reduced demand in the construction sector amidst the festive season in Saudi Arabia in April 2023, whereas in May, construction activities improved slightly, as per the statement of the Chief Economist of the Riyadh Bank, however this rise in insufficient to drive up the PVC prices amidst high supplies. Moreover, the buying confidence was hindered in Saudi Arabia at the termination of June 2023 by the sluggish offshore demand for PVC and the muted trading atmosphere after one week of the EID holidays in the Saudi market. Additionally, the economic slowdown in the region led to a decrease in the manufacturers' and traders' purchasing enthusiasm and profit margins. These factors collectively contributed to the decline in PVC prices in the second Quarter of 2023 in the region. Meanwhile, the availability of cheaper Ethylene and increment in the production rates, coupled with a rise in employment rates, prompted market participants to lower their prices in response to reduced input costs in Saudi Arabia throughout this quarter.
The price of PVC in the USA showed a southward trend in the quarter ending March 2023, with a quarterly drop of 3.3%, owing to the abundant inventories and slowed-down inquiries in the downstream construction and other competitive sectors. Moreover, PVC offers in the US market was weighed by the rising interest rates and bearish consumer buying sentiments. The PVC enterprises also felt competitive cost pressure in the domestic market of the USA, impacting the final discussions of the commodity this quarter. In addition, the volatility in the upstream crude oil prices put input cost pressure on the vinyl monomer value chain at the termination of the Q1 of 2023. Thus, the price of PVC for Suspension grade was assessed at USD 945/MT FOB Texas (USA) in March 2023.
In Asia, PVC prices showed a southward trend with the slump downstream momentum in the quarter ending March 2023, as ample availability of stocks and competitive offers pressured commodity prices downward. The PVC inquiries were weak in the domestic and international markets, and the enterprises felt uncertainties in the APAC market. However, market sentiments varied at the termination of March 2023 as some market players cited low-cost products from Asia combined with competitive freight rates. Moreover, PVC overseas offers from the other Southeast Asian market amidst dampening demand continued weak purchasing sentiments in March 2023. India's import K67 fell by approximately 4% this month, while China and Southeast Asia K67 prices saw a loss of around 1% and 3%, respectively, compared to February 2023.
The German PVC market witnessed a prolonged fall in the quarter ending March 2023, with recent drops in the price trend at the termination of March 2023. The prices tumbled in Germany due to weak demand from the downstream construction sector amidst the falling housing market of the region. The surge in interest rates and the cost-of-living crisis caused financial stress to the consumers of PVC. Meanwhile, the imports from Turkey and other European countries have not seen any improvement in the PVC discussions for April as well, amidst abundant supplies, weak demand, and falling prices in Asian outlets. High inflation coupled with slow economic growth kept trading activity tied to basic needs only in Europe.