US VAM buyers say Dow hike means lower prices not coming soon

HOUSTON (ICIS)–A $200/tonne increase for US vinyl acetate monomer proposed by Dow Chemical this week has prompted some buyers to revise their timelines for when prices will turn lower.

“I thought this would get better by August, but it may be November now,” a buyer said.

Sources said it is too early to tell if other producers will follow Dow, which announced the increase on Monday.

US VAM spot prices have soared this year because of a supply squeeze stemming from the closure of two plants in Europe in late 2013 that made buyers on the continent and in South America more dependent on US-made material.

A price war between the two regions followed, pushing VAM spot prices to essentially double before tailing off to around the $1,800/tonne level in July. The current spot range of $1,700-1,900 tonne has been in place since mid-July.

Three of the four major US VAM producers are operating under force majeure declarations – two of them since March – though some are producing material and at optimum rates. Major US producers include Dow, Celanese, LyondellBasell and Kuraray.

Buyers in Europe and Latin America have expressed scepticism that the force majeures have lasted so long and are being used to drive prices higher.

“I think the producers are keeping the marketplace in the dark, and that of course works to their advantage,” a buyer said.

In South America, a buyer denied that VAM demand has increased, as Dow said in its letter raising prices on Monday.

“So, they are just making more money,” the buyer said of VAM producers. “It’s just speculation.”

Another Latin American buyer still hopes for a lower price in September, even with the Dow hike this week.

“Availability is not as tight as it was a few months ago,” the buyer said. “We were thinking things were getting better.”