Dec PVC outlook firm despite the season in Asia

In Asia's PVC market, sellers are talking about seeing higher December prices on the strength of firm upstream markets, in spite of the fact that December is traditionally a slow month in terms of PVC demand.  For their part, buyers are generally expecting to see higher prices or at best rollovers for December as sellers will need to achieve higher prices in order to cover their increased production costs.  Spot ethylene prices in Asia recently breached the $1000/ton market on CFR NEA basis for the first time since the end of July owing to limited supplies caused by a dearth of ethylene exports from Iran and Saudi Arabia.  Strong naphtha prices have also helped support the rally in the ethylene market, with naphtha prices currently hovering at around $690/ton CFR Japan, with some cracker operators complaining that they are having a difficult time securing profitable ethylene prices even after the recent price gains due to surging naphtha costs.  Firming ethylene and naphtha prices have also helped drive up spot VCM prices, with spot VCM quotes gaining another $5-10/ton over the past week to be reported at around $680-690/ton CFR Far East Asia and $700-710/ton CFR Southeast Asia.

In China, November import business for mainstream Asian origins was settled last week at $850-870/ton CFR China, cash, a decrease of $20/ton from October but considerably above the initial November decrease expectations that prices would fall much closer to the $800/ton level as they in fact did in Southeast Asia.  Asian producers reported that they managed to divert some of their normal allocations to China to other markets such as India for November which kept supply levels balanced with the seasonally-slow demand and helped moderate the decrease amounts.  As demand from India is still said to be good and upstream costs remain at high levels, most players are expecting Asian producers to nominate increases on their initial December offer levels, with some producers reportedly having already announced higher December prices to India.  Buoyed by strong sentiment in the import market and supported by higher upstream costs, China's domestic PVC market  is already seeing firmer prices, with several sellers inside China beginning the week with price increase announcements of CNY100-200/ton ($15-29/ton) while simultaneously lifting their export offers by around $10/ton.

In Southeast Asia, sellers are also expecting to achieve price increases on their December business despite the seasonally poor demand.  A Thai producer expressed a December sell idea last week at $870-890/ton CIF SEA, cash, an increase of $30/ton when compared with their most recent November done deal levels, with the producer citing their expectations of firmer import prices in China as support for their price increase targets.  Early this week, a PVC compounder in Singapore reported receiving a December offer for Malaysian PVC at $870-875/ton CIF Singapore, with the converter adding that this price represents an increase of $30-40/ton from the most recent import offers they received for November.  In local markets, a Malaysian producer reported that they lifted their prices by MYR30-100/ton ($9-30/ton) last week on the back of firmer upstream costs while adding that they are hoping to achieve another price hike of MYR50-100/ton ($15-30/ton) this week as last week's increases were not sufficient to offset their rising production costs.