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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 Q2 2016
VCM prices closely mirrored the prices of sole derivative polyvinyl chloride (PVC), with the VCM-PVC spread fluctuating within a range of $152.50-192.50/tonne in northeast Asia, and $122.50-155/tonne in southeast Asia.
Spot demand in northeast Asia was lacklustre throughout the second quarter, especially in the key market of China. This was due to weak performance of the PVC market in China. While VCM sellers had been trying to close the VCM-PVC spread, VCM buyers chose to be cautious.
Spot VCM supply in southeast Asia grew tighter starting in May due to a lack of spot offerings from Chinese and Taiwanese exporters. A major southeast Asia VCM producer was not able to run its facility at maximum capacity since its VCM expansion was completed in Q1 2016, hence it was not able to meet the spot demand in southeast Asia.
VCM prices rose from $595/tonne CFR NE Asia and $625/tonne CFR SE Asia at the start of Q2 to peaks of $650/tonne CFR NE Asia and $675.50/tonne CFR SE Asia by the end April. Following that, prices softened to $607.50/tonne CFR NE Asia and $610/tonne CFR SE Asia by the end of Q2.
Updated to Q2 2016
European vinyl chloride monomer (VCM) spot prices rose in the second quarter as a result of firmer feedstock and downstream prices.
The feedstock ethylene price trended steadily upwards from April to June as a result of rising crude oil prices. Downstream polyvinyl chloride (PVC) prices also increased due to a combination of tightness in some areas, good seasonal demand and an upward trend in feedstock prices.
As a result, VCM spot prices have trended upwards accordingly.
The majority of VCM production is integrated into larger chlorvinyl systems, and the spot market is thus extremely quiet under most circumstances.
Very little new business has been recorded in the European market in the early part of 2016 as a result. Some players also attributed this partly to weaker-than-expected PVC demand.
Updated to Q2 2016
US vinyl chloride monomer (VCM) prices were already on an upward track in April when an explosion and fire at the Pajaritos complex in Coatzacoalcos, Mexico, a joint venture of Pemex and Mexichem, destroyed the VCM plant there and threw the market into disarray.
Spot prices spiked for a week or so, as market players sorted out the impact of the new production situation.
Though the scare has passed, nagging VCM outages have continued to plague the US market.
But US producers, which have ongoing supply arrangements and provide most of Mexichem’s vinyl chloride feedstock requirements, are expected to pick up the slack of the lost production: estimated at 130,000-170,000 tonnes in 2015.
That effort is aided by the loss of a buyer of US VCM, Australian Vinyls closing its Laverton plant in February and ending the contract that had supplied 100,000 tonnes of US material to that market in 2015, according to US government data.
Prices eased back in June along with values for derivative polyvinyl chloride (PVC).
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