PVC prices have declined by a further Rs5/kg, or 3.7%, to Rs130.3/kg, w.e.f. 1st Jun’21. This is the second decline in the last 15 days. After an increase of Rs19/kg, or 16.2%, in Q4FY21, PVC prices have fallen by 4.4% in Q1FY22-TD and 6.5% from the peak of Rs139.3/kg in May’21. While the price surge in FY21 was led largely by sustained supply-side issues globally amid intermittent domestic lockdowns, the recent fall is essentially a result of expected imports of calcium carbide-based PVC from China in the near term along with correction in global prices.

With the latest price fall, we expect PVC pipe players to face volume squeeze in the next couple of months as traders might expect a material price decline going forward. CPVC pipe prices on the other hand are likely to surge in the foreseeable future. We thus prefer Astral (ASTRA) over Prince Pipes and Fittings (PPF) and Supreme Industries (SI).

Global price correction leads to further fall in PVC prices. After an increase of PVC prices from Rs65.6/kg in May’20 to Rs139.3/kg in May’21, prices have fallen twice in the course of the last fortnight – by Rs9/kg – to Rs130.3/kg. The fall is attributable to global price correction as well as expected imports of calcium Chinese imports based PVC into India from China in the near term. Chart 1: PVC price movement post Dec’18

Near-term pressure on PVC prices may impact volumes/margins for PVC pipe players. With the fall in PVC prices, traders in the segment are likely to remain wary of further fall over the next couple of months, and that is likely to impact volumes of players like SI and PPF in the near term. However, considering the volatility in PVC prices going forward, we continue to expect consolidation from unorganised to organised segment and thus likely market share gains for top PVC pipe players.

CPVC pipe players expected to report healthy volume growth in near term. We expect CPVC pipe players to outperform their PVC pipe counterparts in terms of volume growth in the near term due to likely increase in CPVC prices and restocking due to the same. Also, with CPVC pipe prices expected to trend higher in the near term, we expect players in the segment to continue to witness strong volume traction and inventory gains. Hence, we prefer ASTRA over SI and PPF.

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