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Oversupply, declining demand growth worry Asian PVC

Oversupply, declining demand growth worry Asian PVC

Industry News
Release time:
2010/06/24 17:37
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  A likelihood of oversupply and softening demand growth in the key China market has unleashed anxiety among chlor-alkali players in Asia ahead of the 14th Asian Chlor-alkali Conference, which starts on Thursday in Shanghai, China.However, strong performance of theIndian PVC market has provided a cause for cheer, they said. China is expected to bring onstream nearly 5m tonnes/year of polyvinyl chloride (PVC) this year, taking its totalnameplate capacity to around 23m tonnes/year, but actual production would only be around12m tonnes/year if the operating rate remained at 50% - recorded last year - due to high production costs, the source said.“Demand growth, on the other hand, is expected to slowto 8% year-on-year in 2010, down from the double digit growth seen in 2009,” an industry source said.China’s consumption of PVC was expected to hit 10.6m tonnes/year in 2010.

  “But even so, it would leave China with a surplus of 1.4m tonnes, [which is] not a happy situation with the global economy still under a shadow of crisis,” the source added. Demand growth for PVC in China was expected to slow further to 7.5% in 2011, amid a slowing down of the construction sector due to the government’s measures to cool the economy. Meanwhile, India’s PVC consumption this year was expected to grow by double digits to 1.9m tonnes/year, overtaking the 8-9% GDP growth estimated for fiscal 2010. “Of course, this is nowhere close to the 30% demand growth seen in 2009, but we must remember [that] 2008 was a bad year and the construction sector took a big hit from the global financial crisis,” a source close to an Indian producer said. With local production estimated at only 1.2m tonnes in 2010, India’s imports are set to balloon to 700,000 tonnes this year, which is good news for Asian producers with high inventory levels.

  Another reason to cheer is a decline in feedstock ethylene costs, which would improve stand-alone PVC producers' margins. Ethylene spot prices in northeast Asia were hovering at an eight-month low of $900-950/tonne (€729-770/tonne) CFR (cost and freight) NE (north east) Asia last week, according to data from ICIS. However, integrated producers were facing the heat from relatively high crude oil and naphtha feedstock values even as PVC prices dipped to $900-930/tonne CFR China on 18 June, a $60-70/tonne fall from a month earlier, according to prices assessed by ICIS.




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