Asia VAM may strengthen further on tight supply

SINGAPORE (ICIS)–Spot vinyl acetate monomer (VAM) prices in Asia may continue to strengthen in the near term as regional supply is currently tight, with added pressure from possible competition from European buyers, industry sources said on Monday.

On 20 November, VAM prices rose in southeast Asia and south Asia, but were flat in northeast Asia.

Prices were assessed at $860-880/tonne CFR (cost and freight) SE (southeast) Asia, up by $10-20/tonne; at $880-910/tonne CFR South Asia, up by $20-30/tonne; and at $830-850/tonne CFR NE (northeast) Asia, according to ICIS data.

“Prices are firming in line with ethylene but I think the market should be more stable in January as supply should improve in January,” a southeast Asian buyer said.

At midday, ethylene prices stood at $1,080-1,100/tonne CFR NE Asia, ICIS data showed.

VAM discussions for December delivery cargoes were higher last week, with buyers seen raising bids to close the gap with selling ideas.

Key producers were targeting to sell cargoes at prices that are $70-80/tonne higher than November shipments.

Offers were mainly at $850/tonne CFR NE Asia; above $900/tonne CFR SE Asia; and $930-940/ CFR South Asia, on account of limited supply of Asian product, with competitively-priced Chinese origin material remaining scarce.

Supply is tight with a major plant in Singapore undergoing turnaround and a plant in China just coming back from a prolonged shutdown, while some regional cargoes could head towards Europe, industry sources said.

A 210,000 tonne/year VAM plant in Jurong Island was taken off line for maintenance on 16 November and is expected to be down until the end of the month.

In China, Sinopec Great Wall Energy had a prolonged shutdown at its 450,000 tonne/year VAM plant in Ningxia province following delays in completing modifications works at the facility. So far only three of the nine VAM lines of the plant have resumed production on 15 November, with the output likely to flow to its integrated downstream polyvinyl alcohol (PVA) plant, which is slated to restart at the end of this month.

The restart of the Ningxia VAM plant may not affect China’s domestic VAM prices until the latter half of December, according to local suppliers.

“There are no offers from China. We will try for iso-tank cargoes from China and we’re pushing for offers,” a southeast Asia-based distributor said.

On the demand side, new downstream ethylene vinyl acetate (EVA) plants are due to start up – a 72,000 tonne/year unit in China and a 45,000 tonne/year unit in Taiwan – and boost demand for VAM, market sources said.

EVA output from these plants would be mainly on grades with VAM content of above 26%.

Meanwhile, competition from buyers in Europe, which is in short supply following production issues at their major US supplier LlyondellBasell, may further nudge up Asian VAM prices, market sources said.

LyondellBasell shut down its 385,000 tonne/year VAM unit and its 544,000 tonne/year acetic acid unit in La Porte, Texas in early September for planned turnarounds, which were extended to late October. But unforeseen equipment failures and machinery breakdowns during the turnaround prompted the company to declare a force majeure on supply.

The company imposed sales allocations on VAM and acetic acid for North and South America, as well as Europe.

The tight supply in the US may extend through the first quarter, when Kuraray’s 335,000 tonnes/year VAM plant and Dow Chemical’s 365,000 tonne/year plant are due for turnaround.

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