Europe VAM spot prices increase sharply on supply constraints

07 February 2014 19:51 Source:ICIS News

LONDON (ICIS)--European vinyl acetate monomer (VAM) spot prices increased sharply this week on supply constraints, market participants said on Friday.

Spot prices were assessed by ICIS at €870-900/tonne FD (free delivered) NWE (northwest Europe), up by €30-40/tonne. January contract prices were assessed at €830-870/tonne FD NWE.

February contract prices are following a similar upward trend, sources said, although many accounts remain under negotiation. Demand is steady at seasonally low levels.

Players attributed the lack of supply this week to recent production problems at Sipchem's plants in Saudi Arabia and outages at facilities in the US.

The drastic reduction in European production capacity in the fourth quarter of 2013 means that buyers have fewer alternative sources of supply when cargo deliveries are delayed.

Producers observed that even at normal operating rates, there is insufficient capacity in the US and Saudi Arabia to fill the gap, and Asian imports will be needed despite the higher logistical costs.

One producer said it has concluded spot business at €890-895/tonne FD to all regions in Europe, representing increases of €50-60/tonne from last month.

The source said it had heard of Asian tonnes being offered as high as $1,300/tonne CFR for end-March delivery. The seller said it is sold out for February, and suggested that March supplies could be even tighter.

A second producer said it is pushing for increases of €50/tonne for its February contracts, and potentially more on spot prices. The source said it is receiving numerous enquiries but has no surplus tonnes.

A third producer said it had offered spot material at €950/tonne FCA (free carrier) NWE, but doubted whether consumers would be interested in high-priced offers from Asian producers at present.

"For producers, this time it's definitely interesting," the source said, describing the European market.

One reseller said it has concluded February contracts and spot deals in the high €800s/tonne and low €900s/tonne FD.

Another said it had heard spot prices in the €900s/tonne FD, and some customers are already attempting to secure volumes for March. The source added that it had heard one offer at €1,050/tonne FD, but did not consider this to be a serious offer.

Buyers acknowledged that prices are increasing rapidly. One said it is seeing spot prices at €860-880/tonne FD NWE, while another said it has concluded spot business at €870-900/tonne FD. A third buyer indicated spot prices in the high €800s/tonne FD, up by €40-50/tonne.

A fourth buyer said it had agreed spot prices at €830/tonne on average, representing increases of €10-20/tonne from January. This was well below levels heard from other sources this week. The buyer said it was not affected by supply constraints.

A buyer in southern Europe said it had accepted February contract price increases of €50-100/tonne, bringing its prices into the high €800s/tonne FD. The source noted that demand in the region is still weak, partly on account of very poor weather.

A sixth buyer said its suppliers are targeting contract prices in the mid-€800s/tonne FD, up by €30/tonne. The source said it expects to finalise its prices at this level, but observed that the increases will be difficult to pass onto downstream consumers in the coatings sector.

Demand in January was better than in the same period of 2013, the buyer added, while the high-offtake season will begin shortly.

By Samuel Weatherlake