Vinyl chloride monomer Prices, markets & analysis
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Vinyl Chloride Monomer Overview Transcript
Vinyl chloride monomer, also known as VCM, is an intermediate in polyvinyl chloride (PVC) production and is largely integrated, with only a small merchant market outside of contract agreements.
About 99% of VCM is used in the production of downstream PVC, which is the main driver of VCM prices.
Other drivers include movements in ethylene and chlorine costs as well as events in the wider chlor alkali chain, as producers need to balance the electro chemical unit in order to make the business profitable.
The economy is also a key driver for VCM consumption, as the PVC market is strongly linked with construction activity and GDP.
In the global VCM market, trading activity has depended on the outcome of PVC negotiations, which have been largely unsuccessful for producers, as poor conditions in the construction market continue to cap potential increases and producers’ efforts to pass higher ethylene costs.
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Asian vinyl chloride monomer (VCM) prices were stable at the start of the second quarter of 2014, but rose in May and June on firming downstream polyvinyl chloride (PVC) prices. Northeast Asia VCM prices fell as VCM buyers, who were mostly domestic Chinese PVC producers, lowered their price ideas on the back of softening PVC prices in the domestic Chinese market.
On the other hand, southeast Asia VCM prices continued to firm from April till mid-June as PVC producers increased their offers on the back of improved demand and better netback from the India market. In end-June, southeast Asia VCM prices fell slightly as VCM buyers made lower bids in anticipation of falling PVC demand in India and southeast Asia due to the onset of the monsoon season.
Both buyers and sellers agreed that the demand for VCM would continue to be dependent on the performance of the PVC market in the near future.
Market participants expect VCM supply to remain tight for the rest of the year when the completion of an expansion at a major northeast Asia VCM producer brings some slight relief to the situation.
Updated to Q2 2014
European vinyl chloride monomer (VCM) merchant spot prices have been steady during the second quarter, with values at $680-720/tonne FOB NWE. There has been a lack of merchant activity for VCM spot due to the structural nature of the market, as the majority of systems are integrated and demand is captive for the most part.
Even though there has been a spate of plant outages over recent months, these mainly involve the whole value chain and have been planned and stocks have therefore already been built in advance, which means that any incremental VCM merchant buying interest was unlikely.
In addition, even though downstream polyvinyl chloride (PVC) demand is seasonally good, this has not given rise to any additional VCM demand, as players always prefer to buy spot EDC instead of spot VCM because VCM freight costs are expensive and it is a dangerous chemical to transport.
Updated to Q2 2014
The US vinyl chloride monomer (VCM) market was distorted by plant outages during the first and most of the second quarter.
Axiall’s VCM plant in Lake Charles, Louisiana, has restarted and running at commercial rates, although the company is still working to get maximum production from the plant, which has an annual capacity of more than 630,000 tonnes. The plant suffered a fire in December that kept it out of production for almost the entire first half of the year.
US VCM prices moved up in January, rising from just above $700/tonne in December to average about $800/tonne for most of the year so far.
The return of Axiall’s PHH plant to production may mean that prices are likely to ease back slightly during the third quarter.
Exports of US VCM have held fairly flat during the first quarter and into the second quarter. Most US VCM is exported to Mexico, Canada and Colombia.
Updated to Q2 2014
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