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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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Updated to Q1 2016
Although vinyl chloride monomer (VCM) price trends continued to track movements of sole derivative polyvinyl chloride (PVC), the VCM-PVC spread continued to widen gradually throughout Q1. VCM prices softened slightly at the start of Q1 to mid-February, before firming until the end of the quarter.
For most of Q1, PVC prices were stable-to-firm, but could not be increased in tandem with surging feedstock ethylene prices. As a result, VCM market sentiment were cautious, with buyers seeking to widen the VCM-PVC spread. Despite firming PVC prices, buyers aimed for only a modest increase in VCM prices, although sellers stated that they would make use of this opportunity to target a narrower spread.
Asia VCM prices softened from $580/tonne CFR (cost & freight) NE (northeast) Asia at the start of Q1 to $567.50/tonne CFR NE Asia, before rising sharply to $635/tonne CFR NE Asia by the end of Q1.
PVC and VCM market participants view $120-150/tonne as an acceptable range for VCM-PVC spread. At the start of Q1, the VCM-PVC spread in northeast Asia was approximately $122.50/tonne, but widened to $160/tonne by end of Q1.
Updated to Q1 2016
European vinyl chloride monomer (VCM) prices fell in the first quarter of 2016 due to trends in upstream and downstream products.
Feedstock ethylene prices decreased throughout the quarter due to low crude oil prices, while polyvinyl chloride (PVC) prices tended to follow trends in ethylene due to a balanced market, although the decrease was slightly less due to producers successfully gaining margins.
There were few or no VCM sales on the merchant market due to chlorvinyl production largely running smoothly in Europe, with only one major PVC feedstock issue, which was covered with the purchase of ethylene dichloride (EDC) instead.
The majority of VCM production is integrated into larger chlorvinyl systems, and the spot market is thus extremely quiet under most circumstances.
Updated to Q4 2014
The US vinyl chloride monomer (VCM) market saw prices weaken during the fourth quarter as global prices moved down in Asia.
US producers had to contend with higher feedstock costs from ethylene on a number of cracker outages that sent prices for derivative PVC up in September, but quickly began to lower.
Ethylene moved down to an average of $910/ton in November from $1,090/ton in September (from 54.5 cents/lb to 45.5 cents/lb).
That helped producers save margin as they began to price more competitively to maintain export share.
US exports of VCM are up 2% so far this year and in November surpassed 1m tonnes for the first 11 months of this year. Most of that business supplies PVC manufacturers in Colombia, Mexico, Canada and Australia and is done through contract.
US PVC spot export prices fell, too, down from $970-990/tonne on an FOB US Gulf basis in mid-August to $800-830/tonne during the first week of December.
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