European PVC producers upbeat about Q1 due to freight chaos, EC ADD probe

European PVC suppliers have become more upbeat about the first quarter due to uncertainty over anti-dumping duties and with freight market chaos expected to see the cost of resin rise globally.

Aside from the usual new year restocking that follows destocking for year-end accounting purposes, greater uncertainty in global markets was set to lend support to European PVC sellers' prices.

Market sources have pointed to the combined potential impact of any decision by the European Commission as a result of its ongoing probe into anti-dumping duties on US and Egyptian imports and the freight chaos unleashed by low water levels on the Panama Canal and the attacks on seagoing freight in the Red Sea.

The EC announced a probe Nov. 15 after producers lodged a complaint about cheap PVC imports from Egypt and the US from October 2022 through September 2023.

"The ADD investigation is making customers nervous for long lead-time orders and are only seeking prompt material," a trader said.

In addition to the EC probe, the UK said Jan. 8 it has launched an investigation into imports of suspension PVC from the US.

All that has brought European buyers to look again to local producers for PVC, given the uncertainty expected this year and despite the low demand expectations with the cost-of-living crisis still in play.

Last year, local producers faced reduced contract off-take amid expectations of wider availability of more competitive Middle Eastern and US product, which is made using cheaper ethane-produced PVC.

Producer strategy under review

Given the weak demand development through 2023 and expectations for this year, European producers' strategy was focused on targeting volumes at the expense of having to offer low prices, with many customers indicating January pricing was competitive, according to the trader.

"Of course, I think EU producers have done this to secure volumes, but the sustainability of such low prices is certainly in question," the trader said.

With commercial vessel flows restricted in both key global freight arteries, the cost of imports from Asia was already starting to be felt from landings in the Turkish market.

With limited offers from Egypt and Europe into Turkey, South Korean product offers have jumped more than $100/mt since December to around $950/mt CIF Turkey, according to one Turkish trader.

"There are several reasons for that. First, there is an additional demand for restocking, the offers are better than expected," a producer said.

"The second is linked to the Red Sea disruption. It involves higher freight rates with a longer transit time. There are less competitive offers, and some customers hesitate to engage in future arrivals under the market uncertainty. It means less pressure from imported materials, after all that, we are getting the roll over on PVC price this month," the producer said.

"Red sea issues have resulted in a hike in ocean freight. Due to this, Asia is uncompetitive into Europe and may result in higher prices from the US. Asia will announce its price next week most likely and we can assess the economics of the trade flow into Europe vs US versus the domestic contract price," the trader said.

With regards to the level of imports, sources pointed to the wait-and-see stance from both Egyptian and US suppliers. One trader said that although higher pricing has been offered by South Korean suppliers, other offers have been limited.

Higher freight costs might reduce the windows of opportunity between continents and offers in the EU might be impacted during coming months by reduced capacity, one consumer said. "I heard that producers will run the facilities at a lower run rate this year," the consumer said.

Platts last assessed free delivered Northwest Europe spot polyvinyl chloride prices down Eur20/mt ($22/mt) on the week at Eur850/mt on Dec. 20, while CFR Turkey PVC spot prices were unchanged at $790/mt. The markets are not assessed over the year-end holiday weeks.