US VAM continues to follow feedstock ethylene

04 October 2012 23:46  [Source: ICIS news]

HOUSTON (ICIS)--US vinyl acetate monomer (VAM) continues to track major feedstock ethylene, as this week’s price increases show.

Third-quarter contracts for US VAM rose 3 cents/lb ($66/tonne, €51/tonne) after settlement of the September contract for ethylene, which is the most-watched VAM feedstock.

Ethylene for September settled up by 2.25 cents/lb at 48.25 cents/lb.

Ethylene accounts for roughly 38% of the VAM price. The increase puts US VAM quarterly contracts at 57-60 cents/lb, which was the same range for the monomer in early January this year.

The latest move up in VAM and ethylene prices comes in what has been a roller-coaster year for the two petrochemicals. VAM’s ride has not been as volatile as that of ethylene, but both have seen peaks and troughs.

A VAM buyer attributed the falling price periods in the late spring and summer to the drought in the midwest, which the buyer said had a negative impact on demand in the architectural paints and coatings market, a key VAM end-user.

“It’s actually been too hot to paint for much of the year for people in the midwest,” the buyer said. “I think for so long, people put off painting.”

The buyer said the most recent VAM price increase, however slight, could signal strengthening in the domestic market.

“Overall, I think there is pent-up demand out there.”

The paints and coatings market in the US is one of the healthiest sectors in the US chemical industry, according to monthly data released on Thursday by the US Department of Commerce.

VAM and other chemicals for that sector have seen double-digit increases in the value of shipments of US-made material for each of the past five months. For August, the latest month available, shipment values increased by nearly 11%, according to the data.

VAM production has also increased this year while feedstock costs have been declining.

Ethylene costs have generally gone down in 2012. Even with the slight increase in the September contract, monthly ethylene prices now are still 12% lower than in early January.

Meanwhile, VAM production has been going up, rising 9% in the second quarter of 2012 compared with the same period in 2011, according to data from the American Fuel & Petrochemical Manufacturers (AFPM).

During the same period, ethylene contract prices fell by 14%, according to ICIS.

The same thing happened in the first quarter of 2012, with ethylene contract prices falling slightly while VAM production rose 11%.

The other major VAM feedstock, acetic acid, has less of an impact on prices because some of the major VAM producers make their own acetic acid.

US acetic acid spot prices have also declined, down by nearly 5% in the past year, according to ICIS. That feedstock’s price in early October this year, averaging about $620/tonne, was $30/tonne lower compared with the average price of $650/tonne at the same time in 2011.

The ethylene hike pushed VAM spot prices up for the fourth time in as many months, with free on board (FOB) export prices rising $20/tonne last week to $900-1,000/tonne from $880-980/tonne previously.

VAM spot prices now are a little lower than where they began the year. Some buyers say demand for US VAM exports is still weak. VAM shipments to the top three export destinations - Belgium, Mexico and Brazil - showed a 1% decline in July year on year, according to the latest data from the US International Trade Commission.

“There is too much material available for export in the US,” the buyer said.

 In early January, VAM spot prices ranged $975-1,100/tonne, averaging $1,038/tonne. The VAM spot average now is 8% lower, at $950/tonne.

Major US VAM sellers include Celanese, Dow Chemical, DuPont and LyondellBasell.

($1 = €0.77)

By: Lane Kelley
+1 713 525 2653

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