PVC market overview for the 1st quarter of 2006

Since the beginning of this year, prices for two components for the production of plastic products have sharply increased: the cost of PVC resin has increased by 37-45%, and the cost of structural additives for PVC has increased by 10-15%. Manufacturers of PVC products are forced to raise prices for products, despite the fact that the main competitive advantage in regions and projects is the low cost and quality of products. According to analysts, in order to compensate for the losses, companies will have to raise prices on the Moscow and regional markets.

According to market participants, PVC resin rises in price annually by 15-20%, additives for PVC - by 5-7%. These components account for up to 80% of the cost of PVC profiles, the rest is the cost of packaging and production costs.

Manufacturers explain the rise in prices for raw materials by the chaotic rise in the price of PVC resin in Russia - every year it adds 20%, over the last year, prices have grown from 37% to 45%. However, resin suppliers do not have time to increase capacity. As a result, last year Russian plants produced 513 thousand tons of PVC, and the market demand was 583 thousand tons. The deficit is covered by imports - according to the Federal Customs Service, imports of PVC to Russia in 2004 increased from 20 thousand to 70 thousand tons. "Since imported PVC was more expensive than Russian - $ 850 (2004 prices) versus $ 700 per ton (2004 prices), now this trend looks exactly the opposite, i.e. Russian PVC costs 45-49 rubles / kg, and imported ( Germany) - 30 - 32 rubles / kg (the price is indicated at the plant in Germany), however, the given prices are almost equal on terms with delivery to Moscow.

According to the press service of Rehau (a manufacturer of PVC profiles), since the beginning of 2006, the cost of PVC resin has grown by 20-25%. At the same time, the company notes, the growth in prices for this raw material in Russia significantly exceeds the growth in prices in Europe.

Due to the current pricing situation, Rehau has already increased prices for its products in December 2005. The rise in prices for PVC resin was also confirmed by other manufacturers of PVC profiles: the executive director of Tison, the press service of Plafen and a representative of Proplex (All of these companies are major manufacturers of window profiles).

Maxim Ivanov, an analyst at Centrinvest Investment Company, explains the rise in prices for PVC resin with an impending shortage. "In the next six years, the Russian PVC market will triple following the window market. The market demand will reach 1 million tons per year, and by 2008 a shortage of this product is predicted, since none of the existing PVC producers is going to increase capacity," the expert says. But the most important argument is the rise in prices for petroleum products - the main component of PVC.

Window manufacturers are sounding the alarm. "The most unpleasant thing in the current situation is that we will not be able to raise window prices in response, since the main competitive advantage in the regions is the low price," Sergei Elnikov is unhappy. Manufacturers of plastic wall panels and lining are also confused as they such significant leaps in the main raw materials have a negative impact on the shoulders of consumers. All manufacturers are unanimous in the irreversibility of price increases for PVC products.

Analysts believe that now manufacturers of PVC products are forced to revise their pricing policy in order to maintain their positions in Moscow and the regions. According to an analyst at Finam Investment Company, if companies do not raise prices, the industry's profitability will decrease from 12-15% to 9-10% annually.

According to preliminary observations, prices for profile molded products - rigid profiles, pipes and channels for January-February 2006 increased from 12 to 20%. According to the Austrian company Alfa, the price for PVC resin in February swung upward, but not significantly. However, prices are forecast to rise in the second quarter of this year. On the Russian market, however, the price level for PVC resins remains overvalued due to the shortage.

"Estimates and analyzes" 02-2006
The article uses materials from the newspaper "Business" (January 2006)