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Coronavirus pandemic stokes demand concerns ahead of peak PVC season in Europe

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Coronavirus pandemic stokes demand concerns ahead of peak PVC season in Europe

  • Author
  • Ora Lazic
  • Editor
  • Agamoni Ghosh
  • Commodity
  • Oil Petrochemicals
  • Topic
  • Coronavirus and Commodities

As the coronavirus pandemic intensifies across Europe, resulting in factory closures by major car makers and affecting other PVC consumer segments as well as logistics networks, market sources expressed concerns over demand in the coming weeks and months, which are typically regarded as peak season for the commodity.

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German car maker BMW group, which has been affected by this week's closures, said global demand in the car market is expected to drop, and the company is responding by adjusting its production well in advance and using a broad spectrum of flexibility tools.

"Today, we will start to shut down production by the end of the week at our car plants in Europe and at plant Rosslyn," a BMW spokeswoman told S&P Global Platts on Wednesday.

"The shutdowns are initially scheduled to last until 19 April 2020 and after that, we will continue as the situation requires."

Fellow German car maker Volkswagen and French Groupe PSA (Peugeot, Citroen, Vauxhall, DS Automobiles) were also among the major automotive producers, having announced temporarily shut downs of most of their European plants beginning this week, in wake of the coronavirus pandemic, market sources said.

The companies were not available to comment on Wednesday.

Adding to growing supply chain disruptions, one PVC producer said, they began to see more difficulties with moving product through borders and ports of the affected countries in Europe, as well as issues with truck transport.

"Minor impact so far: in Italy some customers decided partial closure, Sweden was looking for additional PVC, after Poland closed borders. [However], we are trying to prepare for the deeper impact of course for the coronavirus," the source said.

A converter source meanwhile said although March demand was normal, demand for PVC would definitely be affected in April and due to the virus some of his customers in France were closing operations, and hence they had to reduce production there.

"Plant in Italy is running normally, but in April we will likely see impact there as well," he added.

A trader said, "Potential impact on demand side is not looking like we are reaching a peak in the demand season."

Meanwhile, overall PVC converter demand in Europe is estimated at around 10.2%, according to the latest Plastics Europe data, with overall European converter demand for all plastics distributed at 19.8% in the construction segment, 10.1% in the automotive and 6.2% in the electrical and electronic applications.

Main applications for PVC plastic in the segments above are for pipes, window frames, profiles, floor and wall covering, cable insulation, garden hoses, inflatable pools and other leisure, sports applications.

After stable domestic demand in February, March due to the warmer winter weather, also helped with favorable conditions in the exports market.

But market sources said that from April onwards demand picture was more of a question mark.

While supply of PVC in Europe is still seen balanced due to various planned and unplanned production outages, the recent plunge in crude oil prices and its effect on the PVC feedstocks ethylene could add pressure.

S&P Global Platts last assessed PVC spot prices Wednesday, March 11, at Eur780/mt FD NWE.