More PVC rationalizations required to address European supply/demand imbalance: sources

Rationalizations, as evidenced by a potential take-over bid of Spanish chlorine and polyvinyl chloride producer, Ercros, are essential to address the imbalance between demand and supply of PVC in Europe, market sources said.

The EU recently imposed antidumping duties on the US and Egypt, a measure that producers viewed as necessary to protect the European market from feedstock cost-advantaged US exports.

Spanish chlorine and PVC producer Ercros is the subject of a takeover bid by two European chlorine producers. Italian chlor-alkali company Esseco Industrial has joined the bidding race with a competing offer bid of Eur351.115 million ($352.561 million) to acquire Ercros, Esseco said via a statement to Spain's National Securities Market Commission June 27. This offer is 6.7% higher than Portuguese producer Bondalti Iberica's initial bid of Eur329.170 million, announced March 5, which was approved by the Spanish government on June 13.

"Operating rates in Europe are still too low, and a rationalization is needed based on current market demand, before demand and supply are balanced again," a PVC producer said July 2.

Referring to demand for PVC, attempts by producers to restore margins hit by weak demand and volatile energy costs was proving difficult given reduced demand levels within a high interest rate climate. PVC is mainly used in construction applications -- which are sensitive to interest rate movements. With demand for housing and construction low, PVC producers have struggled to lift prices from current lows.

Restoring margins

"There is a clear wish to restore margins by all resin producers. However, I think demand is not yet there to support this margin improvement," the PVC producer said. "We have the ambition to increase prices in July, but in reality, I think it will be logical to have a price that follows ethylene in July and August as demand is low ahead of the holiday season."

Other suppliers said they would seek to increase prices since it was "mandatory to start margin recovery." Producers cited the recent provisional decision by the European Commission to impose antidumping duties on US and Egyptian PVC as a perfect opportunity to restore margins through pricing, with better-balanced European supply, via reduced competitive imports.

"We feel demand in July is better than expected and may be linked to the lack of imported materials from the US, Egypt and Asia," a second producer said.

Another said that overall demand was not expected to improve during the quiet summer months, but "import volumes will decrease significantly or even disappear from US and Egyptian [producers]."

A third producer said: "Import volumes had already decreased due to the uncertainty during the [antidumping] investigation, especially in Western Europe. I could imagine that we could get some additional inquiries from Central and South Europe where import material has played a bigger role during the last few months."

Platts, part of S&P Global Commodity Insights, assessed the FD Germany PVC FD June net contract price at Eur925/mt on June 26, down Eur85/mt from the end of May, while FD NWE spot PVC prices were assessed at Eur800/mt on June 26, down Eur50/mt from the May 29 assessment.

Antidumping duties

The EC announced on June 14 provisional antidumping duties against imports of US- and Egypt-origin suspension PVC, according to the commission's summary of proposed duty, seen by Commodity Insights.

Among US producers, Formosa Plastics will have a 71.1% duty applied to its product; Westlake will see a 58% duty applied on its cargoes; Oxy Vinyls and Shintech will see antidumping duties of 63.7%; while all other US producers will see antidumping duties of 78.5%, according to the EC's summary of proposed duties. Among Egyptian producers, Egyptian Petrochemical Company will be subjected to a 100.1% duty and TCI Sanmar to 74.2%, while all other Egyptian producers could be subject to 100.1% duty.

The commission's antidumping investigation into US and Egyptian PVC exports was announced Nov. 15, 2023. EU producers on Oct. 2, 2023, lodged a complaint against PVC imports from the US and Egypt from October 2022 to September 2023 at prices so low that European producers could not raise prices in line with high upstream energy costs.