Q2 VAM shortage hits HB Fuller's Europe business

26 June 2014 20:36 Source:ICIS News

HOUSTON (ICIS)--A second-quarter shortage of vinyl acetate monomer (VAM) caused margins to shrink for HB Fuller's European business, the CEO of the adhesives producer said on Thursday.

Europe has been particularly hard hit with the loss of half its production capacity in the fourth quarter of 2013 following INEOS’s closure of its 300,000 tonne/year VAM unit in Hull, the UK, and the shutdown of a 200,000 tonne/year unit in Tarragona, Spain, by Celanese.

The loss of 500,000 tonnes of annual VAM capacity in the region has been exacerbated by closures and outages in all regions.

Europe relies on imports to balance supply.

Among US suppliers, two producers had declared force majeure by March. The tightened VAM supplies caused prices to soar.

In March ICIS assessed US VAM free on board (FOB) export prices at $1,500-1,700/tonne. That was up by 54% since early January.

Prices have since reached $1,600-1,700/tonne.

During the same month in Europe, spot VAM prices were assessed at what was then a record high of €1,600-1,900/tonne FD (free delivered) NWE (northwest Europe).

VAM is a key raw material for dispersion adhesives, used in automotive, construction and packaging industries.

"During the quarter, the entire adhesive industry was impacted by temporary shortages of vinyl acetate monomer," said Jim Owens, CEO of HB Fuller. He made his comments during an earnings conference call.  

For HB Fuller, the effect was pronounced in the company's Europe, India, Middle East and Africa (EIMEA) segment.

Fiscal Q2 operating income fell by 28% to $10.2m from $14.1m from the same time last year for EIMEA. HB Fuller's second quarter ends on 31 May.

Owens said the VAM shortage should be temporary. By the second half of the year, VAM supplies should approach normal levels and HB Fuller's prices reflect the new conditions in the market.

Europe VAM spot prices

Additional reporting by Tom Brown

With shale gas dominating the headlines and ethane a major talking point in the petrochemical industry, ICIS editors in Houston are closely monitoring the situation. See the ICIS special report on shale, ethane and US ethane exports at https://www.youtube.com/watch?v=bYbKzYlYMGA.

By Al Greenwood