FocusChina VAM hits 26-week high, may stay firm on tight supply

12 October 2010 05:36  [Source: ICIS news]

By Helen Lee

SINGAPORE (ICIS)--Tight supply propelled China’s spot vinyl acetate monomer (VAM) prices to 26-week highs, with strong expectations that values will stay supported in the coming weeks, industry sources said on Tuesday.

VAM prices were assessed at $900-910/tonne (€648-655/tonne) CFR (cost and freight) CMP (China Main Port) in the week ending 8 October, representing a 20% surge from levels 10 weeks ago mainly caused by tight supply, based on ICIS data.

Over this period, inventory of the material at Chinese ports continued to be drawn down, while imports were becoming scarce with major regional VAM plants running at reduced rates, market sources said.

The recent upswing in crude and naphtha values also helped boost sentiment in the VAM market, industry sources said.

“The mood is strong and supply is getting tight so prices should prevail on a steady-to-firm trend,” said a key southeast Asia-based distributor, citing that regional prices followed the lead of Chinese market, which staged a strong comeback from the holidays.

China was out of the market on 22-24 September for its Mid-Autumn Festival and on 1-7 October for its National Day holiday.

Major VAM producers in Taiwan and Japan had kept operating rates at reduced levels of 70-80% since the third quarter of 2009 in order to maintain the supply-demand balance in the market, market sources said.

This partly caused China’s VAM imports to fall this year. In the first eight months of the year, the country took in 151,820 tonnes of the material, about 7% less of the volume imported in the same period last year.

Lean imports into China also fuelled buying sentiment, market sources said.

“Inventory and supplies at the ports are tightening,” said a Shanghai-based market observer.

VAM is a key intermediate for making polymers and resins for use in adhesives, coatings, paints, films, textiles and other end-products.

Over the long term, demand  for the material would likely be led by the derivative ethylene vinyl acetate (EVA) and solar panel/photovoltaic sector, market sources said.

EVA which contains less than 50 percent vinyl acetate (VA) - is mainly used for films and wire and cable insulation and account for about 7 percent of VAM used.

The global photovoltaic sector, on the other hand, was expected to grow 25% annually and should raise consumption of higher VA content EVA and upstream VAM cargoes, market sources said.

The major VAM producers in Asia include Celanese, Dairen Chemical Corporation, Japan VAM & POVAL Co, Asacco and Sinopec Sichuan Vinylon Works.

($1 = €0.72)

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By: Helen Lee
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