Europe PVC price firm slightly against feedstocks as sellers offset caustic drop

European polyvinyl chloride (PVC) contract prices for July were settled with decreases in line with or slightly smaller than the cost reduction from feedstocks, as a result of a balanced market between supply and demand, and attempts to offset decreases in caustic soda.

Northwest Europe non-discounted pipe grade prices were assessed at €1,198-1,223/tonne FD (free delivered), down €35/tonne on the low end and €37/tonne on the high end. Mediterranean prices fell to €1,150-1,205/tonne FD, down €35/tonne on both ends. UK prices fell by £30/tonne on the low end and £34/tonne on the high end to £1,069-1,105/tonne FD.

The price results were similar in northwest Europe, the Mediterranean and the UK.

The overall outcome reflects a slightly wider spread between European ethylene and PVC contract prices, with a typical change of less than €5/tonne.  Feedstock ethylene prices fell by €75/tonne for July, with PVC seeing a cost pass through of approximately 50% of the ethylene monthly contract price (MCP) delta.

European producers separately pushed for smaller decreases than feedstock costs at the start of the month due to a significant price drop for chlorine co-product caustic soda, which has trended downwards through the first half of 2019. Chlorine is a major PVC feedstock and the majority of PVC producers also produce caustic soda.

There were some successful price increase attempts as a result of this co-product decrease, which offset the slight demand weakness in the PVC market.

Europe is typically quieter in July and August as a result of downstream shutdowns among buyers as well as the holiday period which results in lower business activity.

Market sources are watching this typical slowdown take place with some noting additional effects, including weaker flexible PVC demand in southern Europe and a more pessimistic economic outlook.

In the UK, confidence in the construction market is also down as a result of uncertainty ahead of a rescheduled Brexit, although there has been no immediate impact on prices with contract price settlements in line with the rest of Europe.

Export demand is also low as a result of the weaker global market for PVC and the poor construction market for Turkey, in particular.

Supply is adequate with no significant shortages noted in the market. KEM ONE is carrying out planned turnarounds at two French plants from late July onwards.

The company's production also improved at St Auban in the second half of July although it was not fully restored, with French chloralkali output additionally rising.  Borsodchem will also carry out a planned turnaround in August.