US PVC export offer prices for June are expected to fall by nearly $100 from May to a range of $860-900/mt FAS Houston, due to weak demand and low raw material costs, market sources said Wednesday.
At those price levels US PVC for the export market would hit its lowest level since January 1, when Platts assessed the price on either side of $830/mt FAS Houston.
A combination of weak demand in the global markets, mainly from China, India and Turkey, and tight supply from US producers have put downward pressure on export values since early April, sources said.
"The market is living a chaotic situation because some traders are long now and are trying to sell their inventories at lower prices, but producers would not follow that trend even when the resin price has declined on low raw material cost," one veteran source said.
However, as US producers maintained higher export PVC prices in the first four months of the year due to tight supply and higher ethylene prices, some traders said they have reported losses while selling on CFR basis due to high FAS basis prices and more competitive offers from Asian and Middle East producers in the international markets.
"Last month we reported losses as we practically have subsidized freight costs in cargoes offered to India and Turkey," one larger trader said Wednesday. US freight costs from US to India, China and Turkey ports average around $90-120/mt; additionally US PVC resin has to pay anti-dumping fees in those countries of nearly $45/mt, sources added.
In May, offers from US producers were talked around $950-1,000/mt FAS Houston, while buying interest in CFR basis to Asia, Africa and Latin America was heard around $1,070-1,080/mt, according to Platts data.
Looking ahead, traders expect soft demand in the global markets during June and July due to ample supply. Buying interest from India, one of the largest consumers of PVC after China, was anticipated to decline in the coming months due to the weakness of its local currency, the rupee, and because the monsoon season approaches, one trader said.
From the US producers' perspective, supply will be abundant in the export market as domestic demand was anticipated to be sluggish in the second quarter of the year after buyers replenished inventories in Q1.
Due to the sluggish buying appetite in the domestic segment, prices were expected to drop by 2 cents/lb during June to be traded in the low 50 cents/lb, sources said.
