Asia’s VAM market may continue to languish amid ample supply

SINGAPORE (ICIS)–Asia’s vinyl acatete monmer (VAM) market may continue to languish despite firmer upstream ethylene input costs in May as the lack of supply shortage amid a weakened state of demand continued to negate suppliers’ price hike initiatives.

Northeast Asia-based producers announced price hikes in their domestic and export offers in an attempt to pass on firmer ethylene input costs.

However, sellers continued to outnumber buyers, prompting some suppliers to hold off price hikes in order to safeguard their market share.

Buying interest for spot cargoes across Asia has been muted due to reduced downstream output since early April.

Several end-users in northeast Asia had already reduced their pipeline off-takes by 40% in May on the back of poor exports performance of finished goods.

One such buyer had further reduced its contractual import cargo size and postponed its delivery twice till the end of June from April.

Separately, some downstream ethylene vinyl acetate (EVA) producers in south Korea underwent plant shutdowns in May and June for maintenance, amid a decrease in orders for finished goods.

Underpinning the state of ample supply and limited sales outlets, several sellers have been approaching buyers in China to offload bulk cargoes.

An offer for a 2,000 tonne non-Asian origin material at $600/tonne cost and freight (CFR) China, subject to 5.5% import duty, sidelined the buyer due to the latter’s recent purchase of an Asia-orgin cargo at below $600/tonne CFR China.

The lack of supply shortage and slow demand recovery likewise weighed on the sentiment of buyers in southeast Asia, with a deal for a July delivery cargo concluded at the low $600s/tonne CFR SE Asia, a $200/tonne decrease from the previous deal for an April delivery cargo.

On a brighter note, the overall demand and utilisation rates at certain downstream plants in south Korea and southeast Asia are projected to increase by ten percentage points in June.

Market players in Indonesia projected that the demand outlook for June could improve to 40-50% of normal levels, versus 30-40% of normal levels in May as the country prepares for a gradual exit from strict social distancing measures.

A Thailand-based end-user anticipate a ten-percentage-point increase in its plant utilisation rates to 40% of capacity in June, after a lack of orders for finshed goods forced its plant to shut from 20 April to 10 May.

During the week ended 22 May, the spot prices of ethylene-based VAM were at $600-660/tonne CFR NE Asia, $620-650/tonne CFR SE Asia and $620-655/tonne CFR South Asia, a $10-20/tonne reduction from the previous week, ICIS data showed.

Focus article by Helen Lee