US VAM spot jumps $200/tonne on LyondellBasell’s ethylene FM

Focus story by Lane Kelley

HOUSTON (ICIS)–US vinyl acetate monomer (VAM) spot prices jumped $200/tonne this week on LyondellBasell’s force majeure declaration for its La Porte ethylene cracker in Texas, sources said on Thursday.

US VAM FOB (free on board) export prices rose to $1,800-1,900/tonne from the previous $1,600-1,700/tonne, which had not changed since early May.

An industry source said that the moves by LyondellBasell on ethylene this week and Dow Chemical’s VAM force majeure in June prompted the spike.

Even after two listless months, VAM spot prices have essentially doubled this year because of severe supply tightness in the US and Europe.

US outages earlier this year prompted two force majeures and supply allocations by producers. Then came Dow’s move, and now LyondellBasell’s force majeure on a major VAM feedstock.

A buyer said that LyondellBasell’s ethylene force majeure was affecting other VAM producers because it made the feedstock harder to get.

“So it’s all in pretty bad shape,” the buyer said.

Another buyer said that he had been offered an iso-tank load of VAM at 95 cents/lb, or for roughly $2,100/tonne.

All five US VAM plants are located in Texas, most of them in the Houston area. Major US VAM producers include Celanese, Dow, LyondellBasell and Kuraray. 

The supply squeeze among American producers has prompted a price war to break out between South American and European buyers for US VAM, to the point that buyers on both sides of the Atlantic have begun buying material from southeast Asia and China to make up for what they cannot get from the US.

A recent shipping inquiry shows a broker getting a call for 3,000 tonnes of VAM loading in Houston during the first half of July for shipment to Antwerp.

A buyer in Brazil blamed “opportunistic” traders for inflating prices.

A small VAM buyer in Latin America offered a different perspective on the latest price jump.

The buyer said that it has been paying substantially more than the published spot range for most of this year because of the tight supply situation in the US.

Throughout 2013, the buyer paid the published spot price for US VAM, he said, but this year’s squeeze has forced him to pay much higher prices than the published range.

US producers have consistently quoted him prices over $2,000/tonne this year, and the last truckload he bought (35 tonnes) cost over $2,100/tonne. The buyer said that price applied to Asian material bought from a distributor.

“Everyone’s taking advantage of us right now,” he said.

A look at US spot VAM prices heading into this week’s price increase: