Asia VAM may rebound on reduced supply, firmer feedstock costs

07 October 2016 03:44 Source:ICIS News

Shoe soles 07 October 2016

SINGAPORE (ICIS)--Asia’s vinyl acetate monomer (VAM) spot prices may rebound from record lows amid reduced supply and firmer costs of feedstock acetic acid, market sources said on Friday.

Natural gas-based VAM from China was offered this week at $710/tonne CFR (cost and freight) India, subject to 7.5% import duty, reflecting a $20/tonne increase from the previous week. The offer was equivalent to around $763/tonne on a zero import duty basis.

On 30 September, south Asia prices were steady at $720-740/tonne CFR, ICIS data showed.

Across Asia, VAM prices have shed between 17% and 25% since the start of the year as supply was outstripping demand, according to the data.

Scheduled plant shutdowns at major facilities in China, as well as output cuts in Singapore, will reduce regional supply amid higher production cost caused by rising acetic acid prices, market sources said.

Two VAM plants in China would be taken off line this month as producers’ margins are being squeezed while exports are weak amid a wide buy-sell spread.

Sinopec Great Wall Energy plans to shut its 450,000 tonne/year calcium carbide-based VAM plant at Yinchuan in Ningxia province from 14 October to early November.

Sinopec Great Wall Energy’s VAM plant shutdown was preceded by the shutdown of Sinopec Shanghai Petrochemical Company’s (SPC) 90,000 tonne/year ethylene-based plant, which was shut on 26 September and will remain down up to 12 October.

The shutdown of the plants were brought forward due to prevailing weak international market conditions, a Sinopec official said without disclosing the original turnaround schedules.

Separately, Sinopec Sichuan Vinylon Works plans to shut its VAM plants in Chongqing for a month from 10 October. The plants have a combined production capacity of 500,000 tonnes/year.

In Singapore, Dairen Chemical Corp cut production at its 350,000 tonne/year VAM plant on Jurong Island in late September due to reduced supply of feedstock following an outage at Shell Singapore’s cracker on 27 September.

Shell declared a force majeure on supply of base chemicals from its Palau Bukom cracker complex on 29 September. On 5 October, the company said it expects the cracker with a 960,000 tonne/year ethylene capacity to restart in the next few weeks.

In the key Indian market in south Asia, buoyant demand would help VAM prices to recover, industry sources said.

Some VAM suppliers hiked their offers this week for second-half October cargoes to India by $20-30/tonne, with another producer contemplating a $50/tonne increase in prices.

A couple of suppliers have yet to finalise offers on account of uncertainties on the feedstock front, market sources said.

Most buyers across Asia were inclined to adopt a cautious stance on expectations that the bullish undertone could be a temporary reaction to news of Shell’s cracker outage.

“We're in no hurry [to procure cargoes] as we're thinking that this is just temporary and a reaction to the Shell cracker news and we're hopeful for stable prices,” an India-based buyer said.

With prices deem to be reaching bottom, the buyer is seeking a 2,000-tonne cargo to stock up for the fourth quarter.

A northeast Asia-based buyer said that a moderate $10/tonne price increase would be acceptable unless VAM supply tightens further.

“It is a very difficult [time] for all players from makers to end-users,” a southeast Asia-based distributor said.

“VAM plants have cut production but it is still in oversupply,” he said.

Focus article by Helen Lee

VAM Asia 06 October 2016

Picture: Vinyl acetate monomer (VAM) is used in soles of sports shoes. (Photographer: Norbert Eisele-Hein/imageBROKER/REX/Shutterstock)

By Helen Lee