Houston — Global trade flows of PVC could change significantly later in 2019 if India eliminates anti-dumping duties on the construction staple, opening its market to US material for the first time in more than a decade, sources say.
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As one of the world's fastest-growing economies, India expects sharp construction growth in the coming years, increasing demand for PVC to make pipes, window frames, vinyl siding and other needs for housing as well as commercial and industrial buildings.
Current anti-dumping duties largely shut US PVC out of India, but a Bureau of Indian Standards (BIS) review launched in late 2018 could result in their elimination, allowing US material to compete in a growth market like few others.
"It will definitely change the trade balance," a US market source said. "This would change the whole ball game."
Asian market sources largely expect India to erase the duties.
However, US producers and traders are less optimistic that India's government will lift duties that exceed $100/mt on US PVC, giving other importers that have lesser duties or none at all strong competition from US material that has a feedstock cost advantage from cheap North American ethane.
"There's no chance," a second US market source said of whether India will lift the duties.
A third US source put the chances of making US material duty-free at 50:50, depending on how persuasive current importers concerned about maintaining market share are with Indian officials.
The latest duty is due to expire June 12. Market participants in the US and Asia are watching daily for the results of the review, which are expected to be revealed in May or next month.
INDIA DEPENDENT ON PVC IMPORTS
In 2008, India added anti-dumping duties on suspension-grade PVC from Taiwan, China, Indonesia, Japan, South Korea, Malaysia, Thailand and the US. The higher duty on US-origin PVC increased its disadvantage to other Asian PVC makers.
India's PVC production capacity is 1.45 million mt/year, but estimated demand surpasses 3 million mt/year. That demand is expected to increase in tandem with India's growing economy.
"India needs to import more than half of its demand, which is really crazy," said a market source in India. "India needs to continue importing such amount of PVC or expand its PVC capacity to satisfy its demand."
Some Asian market sources said small PVC makers would likely suffer amid tough competition with US-origin material.
"Small PVC makers may not survive after the elimination of anti-dumping duties," a source said. "The elimination of the duty may be short term as small PVC makers would likely file a request on an anti-dumping duty again."
But some market participants said India's PVC market would not necessarily be flooded by US material.
"So far, US PVC makers are able to clear their PVC without selling to the Indian market. They have their customers already, so I don't think it will come to India ... all of sudden," a market source in Asia said. "But it is pretty much certain that the so-called 'India premium' would disappear."
That premium stems from Indian demand being strong enough to keep the CFR India PVC price higher than prices in other regions. According to S&P Global Platts data, the CFR India price was around $40/mt higher than those in Brazil and China and more than $100/mt higher than the Russian price in 2018.
A US market source agreed that the premium would be gone if duties vanish, but US PVC has plenty of well-established export markets. If India's door opens, the US would enter with flows diverted from other markets.
Industry statistics show US PVC capacity in 2018 was more than 8 million mt/year. US International Trade Commission data show that 2.9 million mt, or 36% of that capacity, was exported and of that, 2.7% went to India. By contrast, the top five markets -- Canada, China, Mexico, Egypt and Peru -- received 46%.
"Americans are not sitting here waiting for India to open it up," a US market source said. "There's a big world out there and US prices are based on the domestic market, raw material costs and other markets in the world."
For Europe, the elimination of India's anti-dumping duties could prompt the US to divert some Europe-bound PVC exports to India, relieving pressure on domestic producers to compete with US flows. Europe also could increase its own PVC exports to India, sources said.
"While nobody except the Indian government knows if this is actually happening, trade flows will change definitely if that happens, and Europe will attempt to put more product there," a trader said.
However, several producers remained skeptical about increased European PVC flows to India given logistical and packaging costs associated with sales to that market.
Europe has the infrastructure to handle so-called "super sacks" that hold 1 mt each, while India and other Asian markets receive resins in 25kg (55 lb) bags.
The different types of packaging require different machines and loading and unloading infrastructure. Super sacks are common for Europe, but Asian and Central and South American markets require the smaller bags. Resins are packaged in bags and loaded into containers for international shipments.
The "transport cost to India could prove to be inhibitive for EU producers," one said.
"Domestically, we sell bulk, in India small 25 kg packages, no bagging machines, it's more cost for us," a second said.
"We try to convince customers in India to use more machines, bigger containers, but manual labor seems to be a lot cheaper there," the second source added.
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