OUTLOOK '18: US VAM to face supply issues in new year

Source: ICIS News

2018/01/05

HOUSTON (ICIS)--The US vinyl acetate monomer (VAM) market will face a pair of supply issues in the first quarter of 2018, with one a lingering force majeure and a busy turnaround season.

Celanese remains on force majeure with VAM because of logistics problems around its 300,000 tonne/year plant in Bay City, Texas that developed in the aftermath of Hurricane Harvey, which struck the Texas coast in late August.

Sources close to the company said in October that the force majeure would be lifted by the end of the month, but dredging around the plant has been slow to resolve.

There was also talk of a production problem at Kuraray’s 335,000 tonne/year unit in LaPorte, but it could not be confirmed.

All five US VAM plants are in the Houston area.

Those units will also see a busy turnaround season next year.

In an earnings conference call, LyondellBasell CEO Bob Patel said the spring turnaround season “looks to be heavier than average, and certainly the planned maintenance looks like it's going to be more than the spring of 2016".

A VAM market source agreed that the early part of the year usually brings a heavy line-up of turnarounds.

“If you look over the past five years, you’ll see that’s when most VAM producers do turnarounds,” the source said.

VAM spot export prices will probably begin the new year at a higher point than a year earlier. Prices began 2017 at a virtual 10-year low, as shown in the chart below.

Export prices dropped in the fourth quarter of 2017 after an explosion at the Eastman Chemical headquarters complex in early October, which reverberated throughout the global acetyls market.

The incident in Kingston, Tennessee set off a global scramble for acetic acid, the major VAM feedstock, and has also been reflected in declining spot VAM prices around the world.

The Eastman outage prompted some of the decline but Harvey also played a part, especially in the US, as with Celanese’s lingering force majeure. Harvey also influenced European spot VAM prices, which weakened at year’s end as supply on the continent returned to pre-Harvey levels.

A buyer in Mexico expects prices to keep declining into the new year, predicting that VAM will test $1,050-1,100/tonne in February because of the turnaround season.

Spot VAM price history over the past five years (2013-17) shows the trend to be flat-to-up pricing in January and February and anyone’s guess in March.

That month has shown the most volatility in Q1 during the past five years, with March also proving to be a fickle month, with two spot increases during that period (2014, 2017), two decreases (2015, 2016) and one no-change or rollover in 2013.

Major VAM producers include Celanese, Dow Chemical, Kuraray and LyondellBasell.