Italy's PVC outlook shaky under shadow of arriving imports

Players in Italy report that October gentlemen's agreements have started to settle €40-50/ton lower than September. This is the first month the PVC market has seen monthly decreases after a six month rising trend this year.

Needless to say, the spot market witnessed the downturn much earlier as a reflection of the global downward trend. The combination of persistently poor demand and improving supplies has also contributed to the turnaround. Spot values have lost €50/ton from the late September levels with offers above €900/ton disappearing from the market. The overall spot offers are reported at €830-890/ton as of this week. The competition from the import market even caused some sellers to provide competitive k67 offers for European cargoes below €800/ton mid this month although they have not been repeated over the last two weeks.

Import offers have also steadily fallen in tandem with the local declines.  When compared to the end of September, they have registered a decrease of €100-130/ton and offers for US, Mexican and Far Eastern origin are reported at €670-730/ton on DDP Italy, 90 days deferred payment, including all applicable costs with late November or early December shipments. Although they retain their competitive status against local European cargoes, they are still trading at a premium when compared to offers given to China, Turkey and Egypt.

While players are slowly wrapping up their October deals with lower prices in Italy, expectations regarding November have started to surface. Some highlight that as import cargoes continue to find their way to the country, this will result in more comfortable supplies in contrast to the state of demand, which is not expected to show any improvement in the foreseeable future amidst approaching year end, winter conditions and low season for PVC applications. Many converters, indeed, from the pipe, profile and cable sectors are reporting at least a 20% drop in their end product orders. In addition, the upstream ethylene and EDC markets are not very supportive of holding the market steady, some comment.

Accordingly, buyers believe that these factors will push European sellers to make aggressive sales with large price discounts starting from November. Depending on the sales pressure sellers feel, competitive offers for European cargoes may re-enter the market with prices below €800/ton in the near term. Some buyers even revised their buy ideas further down, noting that spot values might see levels as low as €600/ton by the end of the year.