Looming Asia VAM plant turnarounds boost sellers’ sentiment amid feedstock cost pressure

SINGAPORE (ICIS)–Asia’s vinyl acetate monomer (VAM) market remained stagnant on a lack of spot trading liquidity, but decreasing supply amid looming plant turnarounds, coupled with a recovery in the downstream ethylene vinyl acetate (EVA) sector, bolstered the sentiment of suppliers.

VAM producers have been unable to pass on feedstock cost gains due to bleak demand since April due to country lockdowns amid the coronavirus pandemic. Dairen Chemical implemented deeper output cuts at the Taiwan facilities in June.

“The pressure of ethylene at $800/tonne or almost doubled in past two months [caused us to] face operating issues and difficulties,” another northeast Asia-based VAM producer said.

The availability of non-Asian supply options into east Asia due to limited sales outlets globally amid the coronavirus pandemic added to regional suppliers’ woes, as evidenced in the China market.

In terms of China’s domestic VAM supply and demand balance, the effect of increased utilisation rates at downstream polyvinyl alcohol (PVOH) plants was mitigated by an unplanned outage at an EVA plant while the supply of VAM was bolstered by ample imports of non-Asian sources in June and July.

Demand across Asia will be mixed in the near term.

End users in South Korea increased their contractual VAM off-takes marginally in June, supported by a 15 to 20 percentage point increase in the utilisation rates at their downstream plants this month. This stemmed from improved demand from China for finished goods in the application areas of adhesives and construction.

But the pressure on margins owing to the unabated hikes in ethylene feedstock costs led some downstream EVA producers in Taiwan to mull further output cuts in July.

In southeast Asia, buyers’ interest in stock replenishment was limited to cargoes delivering in end July or August, pending further clarity on the projected downstream plant utilisation rates for July.

Except for the downstream EVA sector, the output at other downstream industries in Thailand was projected to be capped at 45-50% of capacity in June while the overall demand levels in Indonesia lagged at around 30% of normal levels.

In India, a return of demand for finished goods led some VAM-based adhesives producers to ramp up the utilisation rates at their plants to 20-25% of capacity.

But the demand for spot cargoes remained shaky as buyers still hold sufficient VAM inventories for their production requirements while others opt to bide their time as they are sceptical about continued downstream demand recovery.

During the week ended 5 June, the spot prices of ethylene-based VAM were stable at $600-660/tonne CFR (cost & freight) NE (northeast) Asia and $620-650/tonne CFR SE (southeast) Asia,  while prices in the key south Asia market of India fell $10/tonne at the high end to $620-640/tonne CFR South Asia, ICIS data showed.

Focus article by Helen Lee