pvc in india
TRANSCRIPT
© 2014 Platts, McGraw Hill Financial. All rights reserved.
What is the market outlook for PVC in India: Asia’s largest importer
1
• 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.
2
Overview
3
What dampened demand?
750
800
850
900
950
1000
1050
1100
1150
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
4
Why was this?
5
Carbide PVC floods India
800
850
900
950
1000
1050
1100
1150
1200
1250
1300
$
/
m
t
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
6
Import volume falls on oversupply
Source: India Customs
1
3
7
3
8
3
0
20000
40000
60000
80000
100000
120000
140000
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.
7
Why was there oversupply?
9
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.
10
The exporters
11
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.
12
Conclusion
Price Assessment Process
13
14
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
15
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
16
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
17
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.
18
Thank you!
Please contact me at:
Genevieve Soong
Associate Editor, Asia Petrochemicals
+65 6216 1162