The reduction of sea freight rates in Asia in July has affected the pre-sale prices of PVC shipping schedules. The peak season is not prosperous, and the global shipping market supply and demand have improved. It is expected that shipping prices will continue to decline after September. The Pvc Resin powder market has entered the off-season, but maintenance and damage reduction support prices. The price advantage of PVC powder in Chinese Mainland is obvious, but the Indian rainy season and BIS policy affect exports.
Introduction: Shipping costs in Asia continued to decrease in July, with the Northeast Asia to India route dropping to a range of $100-130 per ton by the end of July. As a result, the pre-sale price for PVC shipping from August to India has been reduced by $70 per ton compared to July.
After failing to increase sea freight prices during the peak season, the price has been lowered
After experiencing a wave of price increases in May and June, accompanied by the accelerated entry of new routes and new capacity, the global shipping market supply and demand continued to improve, and sea freight prices experienced their first downward adjustment in July.
According to multiple sources, MSC's plan to increase container freight rates by $1000 per 40 feet on the US West and US East routes on July 15th has been revoked. This adjustment has also triggered a chain reaction in the market, with other shipping companies following suit and adopting price reduction strategies to cope with market changes.
According to market analysis, the early arrival of the peak season was accelerated at the beginning of this year due to factors such as the Red Sea crisis and the surge in shipments to avoid tariff increases. Global sea freight prices were high in May and June, but with the improvement of transportation capacity, freight rates may continue to fluctuate downward in the short term. It is estimated that after September, with the end of the traditional peak shipping season, shipping market prices may continue to decline.
With the global ocean freight market prices cooling down, the freight rates for China India routes in the Asian container market are currently falling to $100-130 per ton, while last month the freight rates for routes exceeded $180 per ton, a significant decrease.
During the off-season of demand, PVC supply weakened, supporting prices to remain firm
June August is the rainy season in the Northern Hemisphere, especially the peak period of the rainy season in July August. The main demand areas for PVC Resin in the Northern Hemisphere, such as the eastern part of Chinese Mainland, most of India, Southeast Asia and other regions, are facing high temperatures and heavy rains. The demand for PVC pipe and profile products such as real estate, infrastructure, agriculture and other products is significantly reduced, and the PVC powder market has entered the traditional off-season.
In Chinese Mainland, the losses caused by the maintenance and load reduction of PVC resin manufacturers reached more than 740000 tons in July, the largest loss month since May 2019, slightly higher than the 736200 tons in September 2021. The Meiliao Plant of Formosa Plastics in Taiwan, China, China, plans to carry out annual overhaul from mid August to mid September. This involves 800000 tons of vinyl chloride in the island and about 500000 tons of PVC resin powder. In addition, major PVC production companies in South Korea plan to reduce production in August due to sufficient inventory and tight shipping.
Overall, despite being in the off-season of the market, the Asian region remains optimistic about the market price of PVC resin powder in August, given the positive support of market maintenance and damage reduction. In consideration of the decrease of ocean freight, this time, CIF India, Taiwan, China's pre-sale offer for August PVC shipment, will be reduced by 70 dollars/ton to 910 dollars/ton, and CFR China's main port will be increased by 10 dollars/ton to 830 dollars/ton.
Three regions still cautious about arbitrage and export expansion
According to statistics, in the first half of 2024, the total amount of PVC resin powder exported from China's main ports to India will reach 717800 tons, accounting for 55.01% of the total domestic export volume of 1304800 tons. In addition to the convenience in the scale and price of routes from China's main ports to India in the first half of 2024, the more important thing is the price advantage of PVC resin in Chinese Mainland. The price advantage of Chinese Mainland's main ports over Taiwan, China's exports to the Indian market is obvious.
On July 23, after Taiwan, China region of China announced the pre-sale quotation for August PVC shipping, through the calculation model, it can be concluded that the PVC source exported by the main port of Chinese Mainland has greater advantages in the Indian market than that of Taiwan, China region of China, and the preliminary calculation shows that the advantage space can reach 80-90 dollars/ton.
However, from the perspective of market performance, since the middle of July, the price advantage of PVC in Chinese Mainland has begun to show, but the signing of export orders to India has been delayed. After the launch of this round of new quotations, the purchase intention of the Indian market is still on the sidelines, and there is no hot atmosphere in the transaction.
According to the survey, the main reason is that India is currently in the rainy season, with a low demand season and a peak season in September. Indian buyers are not in a hurry to reserve inventory in advance. In addition, due to the upcoming BIS policy by the Indian Bureau of Standards, although there were rumors of a policy extension at this month's discussion meeting, Indian buyers were relatively cautious and unwilling to take risks before the policy was officially announced and implemented. Therefore, even though there is a significant price advantage, it still did not arouse the intention of early stocking. This policy will be implemented in the middle and late August at the latest, when it is expected that PVC in Chinese Mainland will usher in the opportunity of export peak in the second half of the year.
