OUTLOOK ’14: Imports to play greater role in Europe VAM market

By Sam Weatherlake

LONDON (ICIS)–The European vinyl acetate monomer (VAM) market is going through a period of major restructuring, the effect of which will be to significantly increase the role of imports. A similar long-term trend has been seen in the acetic acid market, where the bulk of domestic consumption is already met through imports.

On 4 October, INEOS Enterprises announced that it would close its 300,000 tonne/year VAM plant in Hull, the UK, with immediate effect.

“Low-cost imports and a hostile trading environment made closure inevitable,” the company said in a press release, noting that imports from Saudi Arabia and the US benefit from low-cost raw materials.

On 10 December, Celanese confirmed that it would close its 200,000 tonne/year VAM facility in Tarragona, Spain, after failing to find a buyer. The company said it would cease all manufacturing operations at the site by the end of 2013, and would then proceed to decommission the plant.

The combined 500,000 tonnes/year of nameplate capacity for these two sites represents half of Europe’s approximately 1m tonnes/year of VAM production capacity, according to ICIS data.

Most buyers have shown little concern at the lost capacity, saying that they do not expect the increased dependence on imports to reduce availability, and do not anticipate any difficulty in finding alternative suppliers.

Consumers pointed out that the INEOS plant was operating at well below its total capacity, and Europe has long been structurally dependent on VAM imports.

A sharp rise in import quantities was seen early in the year, coinciding with an unplanned shutdown at INEOS’s Hull plant that lasted several weeks. However, import volumes have remained relatively high ever since.

According to European statistics agency Eurostat, a total of 264,196 tonnes of VAM was imported into Europe during 2012.

In the first nine months of 2013, imports totalled 283,716 tonnes. This represents a rise in the average monthly import volume of almost 10,000 tonnes.

While some producers are leaving the European market or cutting back on their domestic production capacity, suppliers of import tonnes are positioning themselves to play a greater role.

On 3 October, US producer LyondellBasell announced that it had signed a 10-year agreement with Oiltanking Stolthaven Antwerp for the storage and handling in Antwerp of VAM and acetic acid.

As part of the agreement, Oiltanking Stolthaven will invest in new stainless steel storage capacity and rail loading infrastructure.

“[Glacial acetic acid] and VAM are industrial chemicals that are in high demand. Europe has an increased need for these imports. This agreement allows us to solidify our commitment to the European acetyls market,” said Justin Hommes, LyondellBasell’s marketing manager for acetyls in Europe.

LyondellBasell produces acetic acid and VAM at its highly integrated LaPorte facility in Texas, US, where it has access to ethylene derived from shale gas.

Other major sources for VAM imports include Saudi Arabia’s International Vinyl Acetate Co (IVC), and Dairen Chemical Corporation’s 350,000 tonne/year plant on Jurong Island, Singapore.

Dairen began commercial production at its Singapore plant in May, and counts Europe among its target export markets.

“At the end of the day, when you look to the global capacities, they are there,” was the view of one reseller of Asian material.

“Europe was always an importing market, so the game does not change that much,” said a buyer.

The structural shift in favour of VAM imports has been paralleled by similar developments in the acetic acid market, with captive producers choosing to idle their plants and buy imports instead.

Currently, the only large-scale acetic acid plant operating in Europe is BP’s 532,000 tonne/year facility in Hull, which formerly supplied INEOS’s VAM plant at the same site.

According to Eurostat, a total of 800,029 tonnes of acetic acid was imported in 2012. Average monthly import volumes for the first three quarters of 2013 are almost unchanged from last year.

Whether the good availability and lacklustre downstream demand that have characterised 2013 will continue is uncertain, but lack of cost competitiveness means that Europe will become increasingly dependent on VAM imports in 2014.