Producer offers volumes of the construction staple $100/mt below March prices
Buyers show little interest amid uncertain construction demand from end-users
A US PVC producer slashed its offers for April export volumes Thursday in an effort to entice buyers, according to sources, as countries around the globe push stay-at-home orders and businesses shut down to try to stem the spread of the coronavirus pandemic.
Sources said offers that were $100/mt below March price levels at $745/mt FAS Houston illustrated the potential severity of such widespread shutdowns, which could squash demand for PVC, a construction staple whose health is closely tied to economic activity and GDP.
Other producers have yet to announce their offers, the sources said.
"It's really bad out there," a market source said. "Nobody is in a position to do anything. I don't see any possibility of doing anything."
PVC is used to make pipes, vinyl siding and flooring, window frames and other products. Normally prices would be strong in the spring as buyers load up ahead of the peak summer construction season.
However, on Thursday, the US Department of Labor said 3.3 million Americans applied for unemployment benefits last week, highlighting sudden job losses amid shutdowns of businesses considered non-essential, such as restaurants, bars, movie theaters and others where the people could gather and spread the virus.
Some companies are deferring construction as well. Last week Shell Chemical temporarily suspended construction on its $6 billion petrochemical complex in southwest Pennsylvania, and FG LA, a division of Formosa Taiwan, has deferred construction at a planned petrochemical complex in Louisiana.
In addition, feedstock ethylene prices have hit fresh all-time lows, reaching razor-thin margins, as oil product demand destruction from coronavirus shutdowns and the Saudi Arabia-Russia oil price war has battered the energy complex. Ethylene was last assessed at 10.25 cents/lb FD USG Mont Belvieu, just 0.25 cent above the all-time low, while March FD Choctaw ethylene was assessed at 9 cents/lb.
'Three weeks of no bids'
Rob Stier, senior manager of petrochemical analytics at Platts Analytics, said the PVC market was essentially looking at three weeks of no bids as buyers hope to work down whatever higher-priced inventories they have and wait for even lower prices - particularly with construction activity stalling.
When the global financial crisis hit in 2008, export PVC prices fell to $510/mt FAS Houston. The 20-year low was $342/mt FAS in November 2001, after the September 11, 2001 terrorist attacks in the US and during a recession year, S&P Global Platts data showed.
"Platts does not think we could get to that extreme, but it's certainly possible over the next two months," Stier said.
In 2019, the US shipped about 37% of all PVC production overseas, making export markets critical to producers and traders.
Sources said India's decision this week to impose a 21-day lockdown, which also affects its ports, sharply darkened PVC's fortunes. India is a net importer of PVC, as it lacks enough production capacity to meet its own needs. The world's second most populous country also had major construction plans and paid some of the world's highest PVC prices before the pandemic hit.
A market source said Asian suppliers in South Korea, China and even India were heard to be slashing prices for export material as well, which likely influenced sharply lower US offers.
However, that doesn't mean they are enticing bids.
"Almost all markets are dead except the Middle East, and some lowest concluded deals in the Middle East have reached the $710/mt FAS level already," the source said.
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