Europe VAM spot prices rise as plant closures begin to bite

Focus story by Sam Weatherlake

LONDON (ICIS)–European vinyl acetate monomer (VAM) spot prices increased rapidly last week as the effects of recent plant closures started to become apparent.

Spot prices were assessed by ICIS on Friday at €900-1,000/tonne FD (free delivered) NWE (northwest Europe), up by €30-100/tonne from the previous week. At the beginning of the year, spot prices were assessed at €810-840/tonne FD NWE.

February contract prices were earlier assessed at €865-905/tonne FD NWE, an increase of €35/tonne from January.

INEOS Enterprises closed its 300,000 tonne/year plant in Hull, the UK, in October, while Celanese closed its 200,000 tonne/year facility in Tarragona, Spain, at the end of 2013. These plants represented about half of Europe’s total VAM production capacity.

In addition to the structural changes that took place in the fourth quarter of last year, sources attributed a recent lack of supply to planned turnarounds at US plants and production problems at Sipchem’s plant in Saudi Arabia last month.

Major US producers include Celanese, DuPont, Dow and LyondellBasell, while Sipchem’s International Vinyl Acetate Co (IVC) operates a 330,000 tonne/year VAM plant at Jubail, Saudi Arabia. Both regions benefit from lower raw material costs than Europe.

US sources said that there are at least three plant turnarounds coming in the next few months, with LyondellBasell starting a 50-day planned maintenance on 30 March and Dow beginning one in April.

Officials close to Celanese said that the producer’s Clear Lake VAM plant will go down at some point in the second quarter for maintenance.

Most European buyers initially showed little concern at the Hull and Tarragona plant closures, explaining that they did not anticipate any difficulty in finding alternative suppliers.

Europe has long been structurally dependent on VAM imports, and consumers said they did not expect the increased dependence on imports to reduce availability.

Producers said that, even with all plants operating at normal rates, European requirements could not be met without Asian imports, which would incur correspondingly greater logistical costs that would have to be passed onto buyers.

Dairen Chemical Corporation began commercial production at its 350,000 tonne/year VAM plant on Jurong Island, Singapore, in May 2013, and counts Europe among its target export markets.

Import statistics released by European statistics agency Eurostat last week showed that VAM imports into the EU reached 49,862 tonnes in December – by far the highest monthly total for 2013 – compared with 17,854 tonnes in December 2012.

US VAM production rose to 875.76m lbs (397,170 tonnes) in the fourth quarter of 2013, up nearly 20% from the same period in 2013, according to data from American Fuel & Petrochemical Manufacturers (AFPM). The quarterly gain reflected a sizable increase in exports to Europe.

There has traditionally been some correlation between European ethylene and VAM prices (see graph below), as ethylene is an important feedstock for VAM, and prices are typically more volatile than those of acetic acid, its principal feedstock.

However, the €40/tonne fall in the February ethylene contract price had no noticeable impact on VAM prices this month, reflecting the diminishing importance of European cost structures in the market.

US VAM prices assessed on a FOB (free on board) basis have increased by roughly $180/tonne, or about 18%, so far this year on a combination of strong demand, tighter supply and higher feedstock costs.

A southeast Asia-based producer was heard to have sold a 10,000 tonne VAM cargo last week for loading in March at $1,280-1,300/tonne CFR (cost and freight) Europe. 

“Everybody still very jumpy on availability and this pushes pricing further up,” was the view of one reseller last week.

There appears to be no immediate prospect of relief for European buyers: Celanese has announced that it will increase its list and off-list European VAM prices by €70/tonne with effect from 1 March.

Additional reporting by Lane Kelley