September have seen a consolidation of market demand (since pandemic lockdowns) on a worldwide basis and October is following the path. Nevertheless market is jeopardized regarding demand depending on product and its final market. For example we are witnessing a weak PO market in Europe while in Asia its market is normal. On the other side we can see a short to shortage market in the Pvc sector worldwide.
We firmly believe we are in a change of paradigm where market prices are driven by offer (and not anymore by demand). We may see very strong market demand in specific sectors but extra demand is offsetted by weaker demand in other sectors. Therefore the underlying product (i.e. Polymer) should not witness a real shortage unless productions are not running at full capacities (i.e. ABS in Asia) or FM on several important plants (i.e. PVC).
Regarding raw materials we are witnessing a stable to probable softer prices. Naphtha since September is above 350 $/MT and oscillating between 360-370 $/t while Brent is oscillating between 39 to 43 $/ bbl and monomers have posted slight decreases in October after September mostly closed at roll overs. The V shape recovery in prices have definitely lost its pace in the last 2 month and we believe to see weaker numbers if no major event will occur. Pandemic situation in Occidental countries is worsening again and this could put a dent to the price stability very fast if hospitals/ reanimation centers will be close to saturation. Last but not least US election should have a strong influence on global economy in November as it usually does.
Finally exchange rate ( € Vs. $ ) have been pretty stable flirting around the 1.17 to 1.18 level.
Highlight on PVC Market
Pvc market have become critical. We are witnessing on a global scale historical high prices.
Prices in Asia are continuing to grow and new shipments for November are seeing further price increases. The most significant fact is that Asian producers are already sold out with November Shipments. The largest Asian producer have increased around 100$/t November prices ( exact increases depends on exporting regions and quantities ). Taiwanese Major is running at limited capacities ( we can assume around 60% of name plate) keeping the market extremely short. Several maintenance are also ongoing. We believe Asian market availability will remain therefore extremely short till the end of the year.
U.S. Prices have hiked again reaching historical highs with two major producers having production troubles since couple of month. Moreover last typhoons have reduced operations in several PVC production sites. Market is critical and no export activity is noted. We have to remember US is a natural PVC exporter and absence of export creates natural deficit in several regions.
We like to believe it is the craddle of this global tightness.
In Europe demand for the pipe, construction and flooring sector remains strong. Compounding sector is still lagging behind but demand is considered healthy and have consolidated since August.
Nevertheless as stated before prices are today driven by offer and not by demand anymore. We are witnessing a clear shortage in K67 grade, where Northern European major consumers are in deep crisis to source enough material. K57 grade is extremely short while we are seeing a short market on K70. Prices have therefore risen by 100 to 120 €/t since August on the regular market. On the other side, for Spot quantities, extra demand, specially in K67 grade we can see definitely much higher hikes as no extra material is available on the market.
We are expecting this shortage to extend at least to all November.
In Turkey major importers are securing European product at prices around 1.600 to 1.690 $/t 18% VAT included. These numbers remains extremly high and the local market is on real shortage and should continue definitely on November.
Considering Turkey is a net deficit market for PVC, therefore one of the biggest importer of PVC worldwide, this have a direct effect on European tightness where producers, we believe, are preferring exporting to Turkish market at much higher prices. We also have to consider that US is historically a major exporter of PVC to Turkey. Right now no material from US is reaching Turkish harbors due to production issues.
Regarding European production we are still witnessing minor issues in some plants and other plants should restart operations soon. This is not letting Eu producers able to build stocks.
As a Murphy’s mathematical law demonstration, on the 13/10/2020 Kem One declared FM on two major plants ( Saint Fons and Balan ) accounting for a yearly capacity of 499 KT and Shinetsu declared FM in its Pernis plant due to electrical failure for a yearly capacity of 450 KT. Effects are unpredictable but unless these two FM will be rapidly solved the market could implode.
Finally our forecast in Pvc prices for November are definitely on the rising to speculative situations depending on markets regions.
Highlight on Plasticizers Market
Plasticizer markets remain tight in Asia with most producers low with stocks after returning from the Golden Week holiday. Demand in China remains strong at the moment. Korea remains short on export offers with one major producer in maintenance.
Since September we have seen general increases in prices globally.
In Europe fork prices remain wide but shortening depending on regions and producers. We believe market will get more tight in November due to a general low offer situation . We have witnessed Evonik continued problems as well as BASF restart of plasticizer plant in October and Grupa Azoty longer than expected restart after planned maintenance. Lower imports from Asia coupled with US producer remaining very short with quantities are main reasons for this short market.
We can divide our analysis in 2 segments:
European based productions (DINP & DIDP/DPHP) where we are seeing INA converters running short of raw material and BASF short due to its recent restart and low stock levels. We are continuing to see increases month after month and we have reached prices as minimum with 4 digits after many months. This firming trend will extend in November. We believe this recovery on prices in the last 2 months have mainly to be computed to the lack of European offers coupled with nearly non existing imports.
European and Extra European based productions (DOTP) where we can see finally a clear firming trend after a very confused market. Fewer imports are noticed on the market and this trend will continue in the next months. Sibur continues to be on market sidelines. Turkish players remain below market prices but have increased their levels since September and we believe these levels will continue to increase also in November. Demand is stable and fair with the flooring sector continuing to be strong. We do expect higher prices in November at least on the low end of the price fork.