Europe VAM July contract prices see little change in tight market

11 July 2014 23:59 Source:ICIS News

LONDON (ICIS)--European vinyl acetate monomer (VAM) contract prices were mostly rolled over into July, sources confirmed on Friday, with small reductions being indicated in a few cases.

July contract prices were assessed by ICIS in the range of €1,360-1,450/tonne FD (free delivered) NWE (northwest Europe), down by €10/tonne at the low end.

The market remains tight owing to continuing production problems in the US, with sentiment firming again this week in response to the force majeure declared by LyondellBasell on ethylene supplies.

US spot prices jumped $200/tonne this week on news of LyondellBasell's force majeure declaration at its La Porte ethylene cracker in Texas, sources said.

Export prices rose to $1,800-1,900/tonne FOB (free on board) from the previous $1,600-1,700/tonne, which had not changed since early May.

The supply squeeze among US producers has prompted the outbreak of a price war between South American and European buyers for US VAM.

One producer said it is receiving a lot of enquiries from buyers in the US and South America, although the impact of the latest supply constraints is less severe in Europe.

A second producer emphasised that Asian prices have risen on tighter supply in the region, and suggested that isotanks are now being sold in Europe at prices only €50-100/tonne below levels applicable for non-Asian sources of VAM.

The source said it had sold around 200 tonnes on the spot market at €1,350-1,400/tonne FD this week. The producer added that it had been anticipating rollovers for August contracts, but was now more likely to target small increases.

A third producer said that the supply situation is worsening, and suggested that €1,350/tonne FD would be the price floor for all spot material not of Chinese origin.

The quality of Chinese VAM tends to be well below the standard expected for product sourced from other regions, the source noted. A buyer also expressed concern about the quality of the Chinese VAM it had been offered.

Buyers were anxious about the supply situation, but observed that the peak summer holiday season in Europe is approaching, which usually brings a downturn in demand.

One consumer said that offtake has suffered as a result of high prices, with some product substitution taking place in the textiles industry, where styrene acrylics represent an attractively priced alternative to VAM.

Another buyer emphasised that the slight reductions it had concluded for its July contract prices were not sufficient to prevent it from losing market share. Demand is in line with expectations but could fall sharply, the source said, adding that it had bought spot material at a price in the low €1,200s/tonne FD.

A third buyer said that spot prices are mostly around €1,360-1,375/tonne FD, although prices around €1,250/tonne have also been indicated, which it understood to be for isotanks of Asian origin.

A reseller said that spot price ideas are in the range of €1,350-1,400/tonne FD.

Spot prices were assessed up by €10-20/tonne on Friday in the range of €1,230-1,400/tonne FD NWE.

Dow Chemical shut down its Texas VAM unit and declared force majeure on 1 July. The company said that the force majeure became effective on 25 June, when a tube leak in a reactor was discovered at its 365,000 tonne/year plant in Texas City, according to a state filing. Dow began a 50-day turnaround at the VAM unit in late April.

In addition, LyondellBasell has extended its force majeure owing to lack of acetic acid supplies, having originally declared force majeure on VAM from its 385,000 tonne/year La Porte unit in Texas in late March because of a compressor breakdown.

The force majeure declared by DuPont in March on output from its 335,000 tonne/year plant in La Porte is understood to be still in effect. The plant is now owned by Kuraray.

By Samuel Weatherlake