PVC antidumping probe calls into question Europe's ability to compete

The European Commission's antidumping investigation into US and Egyptian PVC exports(opens in a new tab), announced Nov. 15, is the latest in a series of demands made by European ethylene derivative producers to protect themselves against competition from the US, the Middle East, Asia and now North African producers.

EU producers Oct. 2 lodged a complaint about PVC imports from the US and Egypt from October 2022 through September 2023 at prices so low that European producers could not raise prices in line with high upstream energy costs.

As has been the case with similar investigations in recent years in other chemical and resin markets, the probe would determine whether US and Egypt-origin PVC was being dumped and, if so, whether those inflows damaged the European PVC industry.

This latest investigation also follows an EC decision to apply provisional duties of 16%-24.2% on polyethylene terephthalate (PET) imports from China on Oct. 31, after a probe that started in March.

Further upstream to PET production, the EC also introduced antidumping duties on monoethylene glycol exports from the US and Middle East in June 2021, with US exports hit by antidumping duties of 8.5%-52%, while Saudi exports were subject to 11.1% ADDs.

The EU complaints bring into question the ability of European petrochemical producers to compete in a global market that has drastically changed since the pandemic, and whose economics are now being challenged by volatile energy and utilities costs in a weak demand environment.

While some European companies have sought to reduce production to mitigate higher costs and negative margins, others have viewed challenges -- a weak demand outlook driven by high inflation, and high interest rates in 2023 -- as an existential threat to the viability of the European petrochemical and resins industry.

Such questions hinged on how to wean themselves from pricey naphtha, and whether European producers can afford to take the necessary steps to reconfigure plants to compete with US and Middle Eastern producers. Some have even questioned whether they should be running their plants at all.

"Naphtha [in Europe] is an outlet to run refineries. This is a high cost position in Europe and will mean that current [reduced] operation rates of plants at 60%-65%, and no one can survive with these rates, something has to give," a PVC producer source said in early November.

"Long term, no one can survive with these low-operating-rate plants," the source said. "Closing these plants is a temporary solution but long term no one can survive. Some plants will be under discussion for [permanent] closure. I don't think there is any other choice."

European producers tackle negative oil-based margins

Chlorine producers have announced plant closures and mothballing as a first step. This is the same with PET producers, as leading producer Indorama announced a mothballing of its PTA plant at Sines in Portugal.

Kem One announced(opens in a new tab) the mothballing of its French chlorine and caustic soda production facilities, following Nobian's decision to shut its Bitterfeld chlorine plant in Germany between Oct. 9-14.

Indorama also announced it would mothball its 700,000 mt/year Sines, Portugal, PTA plant in the third quarter of 2023 to achieve fixed cost savings of $17 million by 2024.

And despite a recent announcement to shut production temporarily, Indorama's competitor, JbF Global Europe said(opens in a new tab) it would now continue to run its 430,000 mt/year PET plant at Laakdal, Belgium.

"We are running as per customer requirements... and working to keep the plant running," a JbF Global company source said.

Company officials have not replied to a request for comment on whether the plant was still in operation.

Market sources said that amid a re-evaluation of the plant's contractual costs, suppliers were keen for it to continue operating. There was also hope that the recent drop in inflation in the US and in Europe could see interest rates ease and reverse expectations of weak 2024 demand. There was also an expectation that the ADD decision would likely help European PET producers compete against Chinese imports.

European buyers want cheaper MEG, PVC imports

A significant reduction in 2024 MEG contractual commitments from 75% to 50% was expected, while buyers were seeking the other 50% from cheaper imported spot cargoes. This was due to a wide 30% disparity between spot and contract pricing in 2023 and expectations that demand would remain weak.

"Not only the larger customers are getting their way but also the smaller customers. It's all about the volume. There will be plenty of product available next year from US and Middle East. Large portions won't be bound to contracts, [and] I expect that a lot of potential customers are pushing back, and they won't take as much [European] volume under contract," a glycols trader said Nov. 9.

With European production subject to expensive oil-based feedstock costs, regional consumers said they expect greater imports from the more efficient and lower cost US and Middle Eastern shale/gas-based ethylene derivative producers in 2024. New capacities in Asia are also set to add to global production next year and be a potential drag on prices.

"Volume from the US is readily available and will likely drive [European] prices a little lower," a European PVC trader said Nov. 17.

Platts, part of S&P Global Commodity Insights, assessed European PVC contract prices at Eur1,140/mt FD NWE Nov. 15, down Eur30/mt from October. Contract prices have remained under pressure with ethylene ending November at at Eur1,215/mt FD NWE, down Eur45/mt from October. Some European PVC contracts in November were settling at negative margin-busting lows of Eur1,000-1,050/mt DDP Europe.

MEG antidumping duties fail to stem US exports

Even with ADDs applied, US MEG imports continue to arrive, effectively competing with European product offered at a higher price.

"There are higher offers of Eur560-580/mt FCA Antwerp, from European producers but these are not realistic selling levels. They are prices that producers would like to achieve, and I had difficulties selling even at Eur530/mt FCA. This is the split between imported and European (origin)," a European MEG distributor said Nov. 16.

By comparison, Platts assessed the US FOB USG MEG price at $396/mt (Eur363/mt) on Nov. 17

European MEG truck prices remained at historically low levels around Eur530/mt Nov 17, S&P Global data shows. The October contract settled at Eur750/mt, far below feedstock ethylene.