Mercosur, EFTA agreement does not impact PVC market in Brazil: traders

As the market adapts to the new configuration of suppliers after antidumping duties were raised on US material and maintained against China, participants in Brazil's polyvinyl chloride market view the agreement signed by Mercosur and EFTA with skepticism, with no expectations that significant volumes from Europe can supply the Brazilian market.

The Mercosur countries -- Argentina, Brazil, Paraguay, and Uruguay -- and the EFTA countries -- Iceland, Liechtenstein, Norway, and Switzerland -- signed on Sept. 16 a free trade agreement in Rio de Janeiro, after eight years of negotiations. The goal is to create a free trade zone.

The Brazilian industry ministry highlighted the chemical sector as one of the potential beneficiaries.

At the end of August, an ethylene dichloride trader noted market expectations that an agreement could allow PVC from Norway to enter Brazil. This comes amid low European demand and coincides with Brazil adjusting its resin trade flows following the increase of the antidumping duty against one of its main suppliers, the US, in May.

Since this antidumping increase, PVC imports from Colombia and Egypt, which benefit from tariff exemptions, have increased steadily. However, there are doubts as to whether the volume coming from these countries will be able to replace the material that US PVC producers have stopped sending to Brazil.

During the low-demand season for PVC in Europe, some offers from the region to Brazil were heard, but market participants described them as a necessity to move material, not a sign of permanent product availability for exports.

Uncertainties regarding supply have pressured prices in Brazil. Platts, part of S&P Global Energy, last assessed Brazil PVC at $875/mt CFR Brazil, including duties, on Sept. 17, up $40 from $835/mt on May 28, before the antidumping duty against the US was signed. Prices hit their peak on July 2 at $920/mt.

Traders said that they did not expect the agreement between Mercosur and EFTA to alleviate uncertainties regarding PVC supply in Brazil.

"Norway is not a relevant player in the PVC market. Someone might buy 500 mt, 1,000 mt per month, exaggerating. Some people think they will just go out and buy everything; it's not that simple," a trader said on Sept. 17.

Another concern is the time it may take for the agreement to come into effect. A second trader compared it to the tax exemption that favors Egyptian PVC. "The agreement with Egypt came into effect in 2017. We are in 2025. It took years to start having any effect."

According to the Brazilian industry ministry, the agreement still needs to undergo translation and internal approval processes in each country. Market participants said it may not come into effect until 2029.

"By then, I don't even know if I will still be selling PVC," a third trader said.