PVC (Poly Vinyl Chloride) prices have been observed to suffer a surge in regions such as South East Asia, India, and China by a significant margin. This price hike is majorly factored because of an increase in the import offers and contracts which are made by foreign investors at expensive rates. An average rise in the oil prices, an overarching demand for resins, the manufacturing of planned and unplanned polymer, expensive feedstock prices as well as a predicted rise in demand for PVC are few other major reasons for expensive PVC and PVC products in recent years.
Despite an apparent ban on plastic in many regions of the world, the rate of raw materials which directly and indirectly help in the manufacturing of PVC has increased over the last few months. As a keen observation, the prices of crude oil and an aggressive consumption of PVC primarily through exports have increased in the past few years which has also directly impacted the PVC market price. B56003 grade type of high-density polyethylene (HDPE) polymer has undergone a price hike in many developing economies and this has also resulted in a direct price hike of PVC.
Core Reasons For The Rise In PVC Prices
Price hikes are usually difficult to predict and are not always foreseen. The reasons that decide a commodity’s price can have interdisciplinary and multiple dependent variables. PVC is an important raw material in construction activities, and in many developmental and housing projects across the globe. Any price hike directly impacts other products as well as services. Procuring PVC at expensive rates is found to be problematic for producers as well as end-users.
Price volatility impacts the core financial balance sheets for small, medium and large-scale manufacturers. Any hike in the PVC prices is difficult to pass on along the different levels of supply chain of PVC products and in turn, puts pressure on the profit margins of the PVC products manufacturers. The resulting profit margins which get squeezed make the manufacturers take less number of financial risks in their operational strategies, in managing exposures and in their overall business.
The fundamentals of upstream prices have a complex relationship with the company’s overall investment costs and profit margins. For instance, the price of crude oil does not see a direct impact on the prices of plastics, however, it does affect the overall global market for all petrochemicals which may be a potential indicator for price fluctuations of other materials that are produced with the help of crude oil and its distillates. Many evolving industry trends such as a growing demand for packaged foods, ready-to-eat meals, and temporary housing options are helping the PVC industry expand and leading to a hike in its prices due to diminishing availability of feedstock materials.
A subtle transition from using inflexible and hard packaging, consumers are increasingly switching towards flexible and malleable packaging solutions. Often, geopolitical sanctions on countries with high PVC or PVC feedstock exports also tends to affect the price of PVC markets and cause price uncertainties. Keeping a vigilant eye on the prices help industrialists and manufacturers in managing and maintaining their business profits and deal with industrial risks in a better way.
