China emerges as major VAM exporter; Asia prices under pressure

Focus story by Helen Lee

SINGAPORE (ICIS)–China has been shipping out heavy volumes of vinyl acetate monomer (VAM) this year following a spike in prices of the material to record highs in April – when global supply tightened – with regional buyers lured by its comparatively low prices, industry sources said on Friday.

The country is expected to ship out 15,000 to 20,000 tonnes of VAM on a monthly basis, and this should help balance out the supply-demand conditions in the region, market players said.

Its VAM exports in the first seven months of the year totalled 78,447 tonnes, with July accounting for about a third of the total volume at 25,695 tonnes, according to China Customs. For the whole of 2013, China’s exports of the material stood at 3,444 tonnes. (Please see tables below)

Closures of two facilities in Europe, as well as outages at US plants, have tightened global supply of the material and drove up VAM prices to record highs of $1,600-1,700/tonne CFR (cost and freight) NE (northeast) Asia in late-March to early April. In southeast Asia and south Asia, prices on a CFR basis soared to as high as $1,730-1,780/tonne and $1,750-1,800/tonne, respectively, during this period,  according to ICIS data.

This market condition opened up export opportunities for China, which restarted some idled plants to cater to strong demand in Asia, industry sources said.

China has started to compete with Taiwan, Japan, Singapore and Saudi Arabia in supplying the material to Asia, particularly the southern and southeastern parts of the region.

“We started buying from China since April with container and iso-tank cargoes and we can use natural gas-based VAM for general emulsion and adhesives production,” a southeast Asia-based distributor said.

Chinese suppliers are currently offering bulk ethylene-based cargoes at $1,320-1,330/tonne FOB (free on board) China for September shipments, down by $20-30/tonne compared with August cargoes.

Strong export volumes from China partly helped Asian VAM prices to come off highs, market sources said.

On 22 August, VAM prices were assessed at $1,380-1,400/tonne CFR (cost and freight) SE (southeast) Asia, according to ICIS. At these levels, Chinese prices are now on par with major producers’ price levels.

“With plenty of Chinese cargoes, I think VAM prices have already maxed out and I think in the long run prices should stabilise at around $1,300/tonne CFR Asia,” the distributor said.
VAM prices have been falling, partly because of weakening domestic market in China.

Domestic prices in the country were assessed at yuan (CNY) 8,700-8,800/tonne ex-tank during the week ended 22 August, down CNY200/tonne from the previous week.

The downtrend was sparked by reduced offers of calcium carbide-based VAM because of weak sales volumes after the run-up in prices in July, market sources said.

Meanwhile, buying momentum in the export market has slowed down, as overseas buyers were saddled with ample stocks of Chinese products purchased in July and August.

“I have secured my cargo requirements until October at the low-to-mid $1,300s/tonne CFR SE Asia for natural gas-based VAM and up to the high $1,300s CFR SE Asia for ethylene-based VAM ,” a southeast Asian buyer said.

The deals were concluded in mid-July for August and early September lifting.

China’s VAM  production capacity grew to 3.02m tonnes/year with the start-up of a new 450,000 tonne/year unit on 26 August.

ICIS is launching an FOB China price assessment in the VAM (Asia Pacific) report on 29 August 2014.

VAM is a key ingredient in emulsion polymers, resins, and intermediates used in paints, adhesives, coatings, textiles, wire and cable polyethylene (PE) compounds, laminated safety glass, packaging, automotive plastic fuel tanks and acrylic fibres. It is also used in furniture glue and chewing gum.

Most end-use markets for VAM are mature, with growth in largest applications – adhesives, paints, paper coatings and textiles – expected only to track, or be slightly below, GDP. The strong growth areas for VAM are ethylene vinyl alcohol (EVOH) barrier resins, ethylene vinyl acetate (EVA) polymers and polyvinyl butyral (PVB).

China VAM trade (in tonnes)

Source: China Customs

($1 = CNY6.14)

Additional reporting by Viola Pan and Joanne Wang

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections