India pvc pipes and fittings market outlook to 2019 - Research Report
PVC in India
Transcript of PVC in India
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What is the market outlook for PVC in India: Asia’s largest importer
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• India generally requires 80-100KT to run all its downstream operations at full rate. Hence import volume falls when downstream pipe demand reduces
• Buyers are attracted to carbide-based PVC when it is $30-40/mt cheaper than ethylene-based PVC.
• The price differential is required as the production cost to process carbide PVC into PVC pipes is $30/mt more expensive compared to ethylene PVC.
• Carbide PVC is said to be less stable during chemical process thus is harder to convert into PVC pipes
• Taiwan is usually the biggest importer into India, taking up approximately 20-30% of its total import volume every month.
• Next would be Korea, while Japan and Thailand steadily imports few thousand mt per month.
• When the price gap between ethylene PVC and carbide PVC is wide, it is an open invitation for Chinese PVC to enter India despite high ADD costs at $90-100/mt.
• From July – Sep, China exported at least 50KT per month. The oversupply of cargoes from Jul to Sep had curbed demand from Nov onwards.
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Overview
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What dampened demand?
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CFR India Weekly CFR China Weekly CFR SE Asia Weekly
Large price gap invites offers and price war
CFR India hits near 3-year high at $1,135/mt in July 2014
Price falls: 1) Flood of imports 2) Crude plunged
Source: Platts
• As we can all see from the chart on the previous slide, China import prices usually track price trends in India closely as India is Asia’s largest PVC importer
• Asian PVC prices were high in 2014 as production costs had spiked on expensive feedstock ethylene over the same period.
• Prices started falling in August as demand usually quietened during the annual monsoon season
• Prices then fell steeply in Nov-Dec after crude plunged
• Market prices hit bottom in Dec as buyers were holding back amid weak sentiments and were also oversupplied on Chinese PVC.
• The market started showing signs of recovery in late Dec after downstream makers had spent their inventory and crude had stabilized.
• Post monsoon demand was delayed by approximately 2-3months, where firm Indian demand had surfaced for Feb shipments
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Why was this?
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Carbide PVC floods India
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PVC Susp CFR India Weekly
Carbide PVC CFR India
Influx of Chinese carbide PVC
Source: Platts
QVC plant trouble: short of EDC/VCM RIL recovery after de-bottlenecking
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Import volume falls on oversupply
Source: India Customs
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Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15
• This year, the market saw India’s post monsoon demand recovering slower than usual.
• Apart from plunging crude prices, influx of Chinese cargoes was the next impacting factor.
• India requires up to 100KT to run its downstream plants at full rates, thus extra quantity becomes inventory, or an oversupply.
• From the chart, we can see that India’s Jan- June import volume were steadily between 70-100KT.
• Whereas from July onwards, it spiked to 130KT and only fell to around 100KT in Oct.
• Peak PVC demand usually lasts from Jan till May, as monsoon season commonly occurs from July to Oct
• However, Indian buyers had purchased at least 50KT more than they usually require during the lull period.
• All these supplies had piled up as inventory, allowing downstream makers to survive on minimal buying for at least 2-3 months, thus delayed post monsoon into JFeb 2015.
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Why was there oversupply?
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Main PVC exporters into India
Country Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14
Taiwan 31920 (25%) 42100 (31%) 27100 (20%) 24563 (23%) 21400 (24%) 21131 (28%)
S Korea 23040 (18%) 24020 (17.5%) 30200 (22%) 22900 (21%) 29353 (33%) 25265 (34%)
Japan 360 (0.3%) 1890 (1.4%) 4800 (3.5%) 5827(5.4%) 840 (1%) 4170 (5.6%)
Thailand 4200 (3.3%) 5000 (3.6%) 4600 (3.4%) 7483 (6.9 %) 3375 (3.8%) 3504 (4.7%)
Others 18807(14.6%) 13286 (9.7%) 19483 (14.2%) 23769(21.9%) 26270 (29.6%) 10052 (26.2%)
Total (w/o
China) 78,327 86,296 86,183 84,542 81,284 73,736
China 50380 (39%) 51000 (37%) 51200 (37%) 24145 (22%) 7570(8.5%) 1123 (1.5%)
TOTAL 128707 137296 137383 108687 88808 74859
Source: India Customs
Major exporters: Taiwan and South Korea
Influx of Chinese cargoes tip the scale and results in oversupply
• India generally requires 80-100KT to run all its downstream operations at full rate. Hence import volume falls when downstream pipe demand reduces
• Buyers are attracted to carbide-based PVC when it is $30-40/mt cheaper than ethylene-based PVC.
• The price differential is required as the production cost to process carbide PVC into PVC pipes is $30/mt more expensive compared to ethylene PVC.
• Carbide PVC is said to be less stable during chemical process thus is harder to convert into PVC pipes
• According to the table, Taiwan is usually the biggest importer into India, taking up approximately 20-30% of its total import volume every month.
• Next would be Korea, while Japan and Thailand steadily imports few thousand mt per month.
• When the price gap between ethylene PVC and carbide PVC is wide, it is an open invitation for Chinese PVC to enter India despite high ADD costs at $90-100/mt.
• From July – Sep, China exported at least 50KT per month. The oversupply of cargoes from Jul to Sep had curbed demand from Nov onwards.
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The exporters
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PVC in India: Near-term outlook
Stable demand in H1 2015
• Usual demand to last till June
• Strength of demand depends on monsoon
Influx of Chinese PVC remains as threat to other PVC producers
Other factors:
• Condition of the agricultural sector
• Unseasonal rain (seen in March across India)
• Volatile energy complex
• Market participants expected demand to remain strong till June on peak irrigation season
• While traders are purchasing cargoes ahead of end-user demand, downstream demand is increasing at a slower pace
• To fulfill India’s import requirements of 80-100KT, buyers must take Chinese PVC since major sellers are unable to fully satisfy their large requirement
• However, if buyers take more than 30KT of Chinese PVC, that can prematurely suppress buying demand for Taiwan and Korea PVC like observed last year
• Hence major Northeast Asian sellers have to be careful not to hike prices too high, and aim to maintain a small price gap.
• Further price trends of Chinese carbide PVC should also remain as focal point throughout the year.
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Conclusion
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Platts PVC assessments
Timing: Delivered 15-30 days forward
Cargo size: 100-500 mt
Specifications: Suspension grade with
K value of 66-68 (SG 5).
Prices based on latest information sourced
from the market, up to the close of the
assessment window at 4:30 pm Singapore
time
More information can be found on the Platts
Petrochemicals Methodology Guide
http://www.platts.com/IM.Platts.Content/Metho
dologyReferences/MethodologySpecs/asian-
petrochemicals-methodology.pdf
Weekly Price
CFR India, CFR China, CFR Southeast Asia
China Domestic: Ethylene-based PVC, Carbide-based PVC
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Platts EDC/VCM Assessments
Weekly price
CFR Far East Asia, CFR Southeast Asia
EDC:
Delivered 20-40 days forward
3,000-5,000 mt
VCM:
Delivered 15-30 days forward
2,000-6,000 mt
Prices based on latest information sourced from the
market, up to the close of the assessment window at
4:30 pm Singapore time
More information can be found on the Platts
Petrochemicals Methodology Guide
http://www.platts.com/IM.Platts.Content/Methodol
ogyReferences/MethodologySpecs/asian-
petrochemicals-methodology.pdf
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How does Platts engage the market?
Phone calls IM: Yahoo/QQ
Electronic mails
HEARDS: PCA 005
Platts Market on Close Process Click to
learn more
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What is Market on Close assessment process?
An important part of the price discovery process is the Market on Close assessment process.
3:30pm
Afternoon pegs are created based on market information collected and are sent out.
3:30-4pm
We invite firm bid and offers from approved market participants on to the MOC.
4-4:30pm
Participants can increase or decrease their bids and offers. These price movements are tested by
the market as they are open bids and offers, i.e. seen on PCA0005
After 4:30 pm
No new information will be accepted, and the numbers on the MOC process will form an
important basis for the final assessment of the day.
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Thank you!
Please contact me at:
Genevieve Soong
Associate Editor, Asia Petrochemicals
+65 6216 1162