LONDON (ICIS)--European vinyl acetate monomer (VAM) market participants mostly believe that 2018 will be similar to what they experienced this year, barring unforeseeable events.
Such unpredictable events actually occurred in the autumn of 2017 when Hurricane Harvey placed a significant, if comparatively short-term, squeeze on supply.
The hurricane in the US gulf region was probably the most important market-moving event to happen in the year and demonstrated how easily such an occurrence could intervene to derail carefully thought-out projections.
The market enters 2018 with values having softened in the last two months. Sellers are at pains to emphasise that this does not signify that the underlying condition of the market is not soft.
The lower prices of November and December represented a correction, expected by both sides, from the high numbers in the wake of hurricane-induced tightness.
From 1 January, there will again be another suspension of the 5.5% import duty into the EU.
The experience of 2017 indicates that this will be an influential, though not decisive, factor on market balance in the first half of the year.
The increase of the duty-free quota to 350,000 tonnes means that, unlike with the 200,000 tonne quota of 2016, the market is unlikely to be flooded with material in the first two to three months, with the potential to distort natural ebbs and flows and hence pitch prices into a slump that does not reflect the underlying balance of supply and demand.
The suspension of the import tariff constitutes a potentially significant factor because of the relative absence of domestically produced material available for purchase on the merchant market.
This has been the case since INEOS retired its plant at Humberside in the UK at the end of 2014, and Celanese followed suit by closing its Tarragona unit in Spain.
The supply side may see an important change in 2018. In September 2017, INEOS announced that it intended to re-enter the market, with the opening of a 300,000 tonne/year facility.
Nothing concrete will happen yet, as the new plant is scheduled to come on-stream in 2020, but the company said it would make its decision in 2018 where it will be sited.
The favoured location might or might not have a bearing on how material could flow to consumers, once in operation, but the most important consideration will probably be the definite statement of intent that that decision would represent.
It is true enough to observe that many players have become more (cautiously) positive about the future needs of the market, but it is nevertheless regarded as quite a mature one.
The additional capacity promised by the opening up of the new plant, whether on the old site or elsewhere, must have some implications for the balance of the market, which could start to be manifested as early as 2018 in anticipation of product emerging from the unit.
If output can be offered to European converters at competitive prices, allowing for some transport advantage ensuing from its being closer to their businesses, other suppliers may realign their geographical options, perhaps focusing more on faster growing regions of the world.
Naturally, these suppliers have existing contracts and established relationships with customers.
It is fair to say that the INEOS plans were greeted with some initial scepticism by other players when originally made public.
However, that process of realignment might start faster than expected if and when an announcement on substantive details is made.