PP tight supply

Players in Asia’s PVC markets are preparing for another month of steep increases in PVC and VCM prices, with a South Korean producer quotes higher May import offers to China, as per Chemorbis. Persistently limited VCM avails along with higher costs were cited as the main reasons for the ongoing increases in PVC prices. Spot VCM deals for April were concluded towards the end of March with increases of US$60/ton from March done deal levels. As VCM availability from Japan, Asia’s largest VCM producer, remains limited and upstream energy costs have been gaining over the past two weeks, most players expect to see higher initial May offers for VCM, although no clear sell ideas have been reported as of yet. Upstream, crude oil futures on the NYMEX have gained nearly US$5/barrel from the start of the month to surpass the US$112/barrel threshold while spot naphtha prices on a CFR Japan basis are up more than US$50/ton since the start of the month. Both crude oil and naphtha prices are currently trading at their highest levels since the summer of 2008.
In China, a South Korean producer pioneered May PVC price hikes at the start of the week by announcing May prices with increases of US$80-90/ton from April done deal levels. Players had been expecting additional increases on May offers from mainstream Asian producers, although the initial May offers from the Korean producer were well above market expectations of US$20-50/ton increases expressed last week. Import PVC prices in China have a cumulative addition of US$220-260/ton over the past four months, with more than half of the total increase amount coming in April and May. In addition to higher upstream costs and reduced availability of Japanese cargoes, players commented that PVC demand has been picking up inside China recently, with several converters reportedly raising operating rates in response to stronger demand for their end products.