India-China PVC spread seen widening in Q4 on Indian quality control requirements

The polyvinyl chloride spread between CFR India and CFR China prices will likely widen in the fourth quarter amid expectations of recovery in Indian PVC values following its quality control policy.

India's new quality control requirements, ratified by its Bureau of Indian Standards, make BIS certification mandatory for PVC, the Ministry of Chemicals Fertilizers said Feb. 27. The policy will come into effect after 180 days from the issuance of the statement.

Until then, PVC exporters to India will have to submit PVC specifications and gain BIS certificate to keep supplying to India till around September, according to sources.

India's PVC market was under pressure last year following a large influx of Chinese-origin cargoes.

The CFR India PVC price fell to an average of $840.29/mt last year from $1,221.06/mt in 2022, S&P Global Commodity Insights data showed.

Meanwhile, the CFR China PVC price averaged at $811.96/mt compared to $1,061.82/mt over the same period, the data showed. The price spread between CFR India and CFR China narrowed to $28.33/mt in 2023 compared to $159.24/mt in 2022.

BIS woes for Chinese suppliers

Market sources expect suppliers in South Korea, Japan, Taiwan and China to apply for the BIS certificate.

While South Korean, Japanese and Taiwanese would likely continue their PVC exports to India even after September, the question remains whether Chinese suppliers would be able to do so, they said.

According to an industry source, the application process for Chinese producers may not be as smooth as for other Northeast Asian counterparts amid recent political tensions between the two nations. In addition, market participants view the influx of Chinese materials keeping India's PVC values subdued.

India's PVC imports reach record high

India's PVC imports reached a record-high of 3.205 million mt in 2023, up 71.8% from a year earlier, according to the customs data. Of the total, India's PVC imports from China stood at 1.1 million mt, more than double compared to 543,091 mt a year earlier.

Typically, China-origin PVC are priced lower as Chinese suppliers use coal-based, cost competitive carbide feedstock, while other Northeast Asian producers use ethylene. Currently, the carbide-based PVC price is around $20-$30/mt lower than the ethylene-based PVC.

Market sources said Chinese suppliers would seek opportunities to move cargoes to other markets, such as Southeast Asia, Africa or the Middle East later in the year.

Meanwhile, US suppliers were in no hurry to get the BIS certificate as supply quantity is relatively small, market sources said. The US is the largest PVC exporter globally, with around 3 million mt exports last year.

However, India's PVC imports from the US were relatively small at 283,077 mt in 2023 compared to 90,013 mt in 2022, the customs data showed.