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Vinyl Chloride Monomer Overview Transcript
Vinyl chloride monomer, also known as VCM, is an intermediate in polyvinyl chloride (PVC) production and is largely integrated, with only a small merchant market outside of contract agreements.
About 99% of VCM is used in the production of downstream PVC, which is the main driver of VCM prices.
Other drivers include movements in ethylene and chlorine costs as well as events in the wider chlor alkali chain, as producers need to balance the electro chemical unit in order to make the business profitable.
The economy is also a key driver for VCM consumption, as the PVC market is strongly linked with construction activity and GDP.
In the global VCM market, trading activity has depended on the outcome of PVC negotiations, which have been largely unsuccessful for producers, as poor conditions in the construction market continue to cap potential increases and producers’ efforts to pass higher ethylene costs.
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Updated to Q4 2016
Similar to the earlier months of 2016, VCM prices closely tracked the prices of sole derivative polyvinyl chloride (PVC). However the VCM-PVC spread was slightly smaller in the fourth quarter compared to the last quarter.
Demand-supply balance for PVC in the key VCM import market of China was extremely tight in the fourth quarter, resulting in surging domestic PVC prices. As a result, VCM sellers were able to take the opportunity to push for firmer VCM prices which Chinese buyers were more inclined to accept, as they were still seeing healthy margins. Spot discussions in southeast Asia were more muted due to the limited number of spot buyers.
VCM prices in both northeast and southeast Asia tracked PVC prices over the fourth quarter and were on a upward trend over the quarter.
Updated to Q4 2016
European vinyl chloride monomer (VCM) spot prices have tracked upstream and downstream prices in quarter four with little business taking place on the merchant market.
Prices have generally moved in line with PVC, which consumes the majority of VCM produced in Europe, and feedstock ethylene.
Due to most VCM production being integrated into polyvinyl chloride (PVC) production systems, merchant business is normally rare in Europe.
Ethylene dichloride (EDC) is normally favoured to top up feedstock production for PVC in the event of an unplanned shutdown due to being easier and cheaper to transport.
Going forward into 2017 changes are expected on the market due to the phasing out of mercury cell chlorine technology by the end of year. Several European producers are expected to close feedstock plants but maintain PVC production using imported feedstocks, although this is more likely to involve shipping EDC than VCM.
Updated to Q4 2016
The US vinyl chloride monomer (VCM) market has followed that of derivative polyvinyl chloride (PVC) through the year, slowly moving higher and increasing by an average $50/tonne FOB US Gulf during the fourth quarter.
US shipments to Mexico and Colombia have helped replace lost business to Australia. The US shipped more than 100,000 tonnes to Australia in 2015.
Exports to Latin America plants are up after an explosion in Mexico put a VCM plant out of commission there – and created new demand for US material in the region. This year, US exports to Colombia and Mexico are up by more than 90,000 tonnes through October, almost replacing the lost Australian business.
Because almost all VCM is used for the production of PVC through polymerisation, VCM prices closely track PVC values.
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