Asia VAM market faces cost- and supply-side pressures

SINGAPORE (ICIS)–Asia’s vinyl acetate monomer (VAM) prices were largely stable this week amid thin market liquidity, but will continue to face upward pressure from rising feedstock costs and tightening supply, market sources said on Friday.

A number of buyers were largely resisting price increases, noting that current regional supply is sufficient for the broader demand in Asia.

“Current market prices are high and demand is not so good,” a supplier of China-origin material said.

Major producer Celanese issued on 14 August a $50/tonne price hike in Asia ex-China, and a Chinese yuan (CNY) 200/tonne increase in China’s domestic market.

It plans to impose a sales allocation next month in China, ahead of its plant shutdown, which was tentatively scheduled in October.

In the week ended 11 August, VAM prices in northeast (NE) Asia were assessed unchanged week on week at $970-1,020/tonne CFR; while prices in the southeast and south Asian markets fell, according to ICIS data.

VAM prices in southeast (SE) Asia were assessed at $930-950/tonne CFR, down $10/tonne at the high end of the previous week’s price range; while those in south Asia stood at $940-965/tonne CFR, down $15-25/tonne over the same period, the data showed.

Meanwhile, prices of feedstocks ethylene and acetic acid spiked last week. Acetic acid prices across Asia rose to their highest levels since June due to a shortage of September-delivery cargoes from traditional supply sources, while ethylene prices in northeast Asia spiked by around $100/tonne due to product shortages and strong buying enquiries.

“Demand [for VAM] is not improving so [it is] not so easy to increase prices. At most the prices will not drop,” a southeast Asia-based  distributor said.

Suppliers, on the other hand, said that buyers have yet to fully appreciate the challenges currently impacting VAM production. They are hence in no hurry to initiate discussions or commit any volumes for September shipments.

Availability of September-loading cargoes from China, which is a major VAM exporter in Asia, was scarce this week due to recent production issues at a Ningxia-based plant, which capped its utilization rate at 35% since the week ended 4 August.

Overall supply balance was also expected to be impacted by output cuts at calcium carbide-based VAM plants amid ongoing government-led environmental impact inspections at factories.

Expectations of easing supply in southeast Asia following the restart of Dairen Chemical’s Singapore-based VAM plant on 15 August after a turnaround was seen to be offset by unstable operations at a separate Singapore-based plant.

Focus article by Helen Lee

Pictured above: Vinyl acetate monomer (VAM) is used on soles of sports shoes. (Source: WestEnd61/REX/Shutterstock)

($1 = CNY6.68)