Asia VAM hits 21-month highs on tight global supply

SINGAPORE (ICIS)–Spot prices of vinyl acetate monomer (VAM) in Asia rose to 21-month highs this week, driven up by tight global supply amid a spate of plant turnarounds in the US and in Asia.

Discussions levels in southeast Asia and northeast Asia were at the mid-$900/tonne levels to $1,000/tonne CFR (cost and freight), while those in the key south Asia market of India were at above $1,000/tonne CFR. These prices were last seen in July 2015, according to ICS data.

The supply tightness was exacerbated by output cuts at Celanese’s Singapore-based VAM plant in the second half of April due to curtailed ethylene feedstock supply.

Celanese has cut the operating rate at its 210,000 tonne/year plant on Jurong Island to 50-60% following the force majeure (FM) declaration on 13 April on supply of feedstock ethylene by the Petrochemical Corporation of Singapore (PCS), according to sources close to the companies.

PCS shut its No 1 cracker, which has a 450,000 tonne/year ethylene capacity, on 17 April to fix a compressor problem at the unit. The cracker will be down for around two weeks. Consequently, its ethylene allocation was limited to 60-80% of its customers’ monthly requirements, the sources said.

Amid curtailed production at its Singapore plant, Celanese announced on 19 April a $100/tonne VAM price hike in Asia ex-China. In China, prices in the eastern region were raised by yuan (CNY) 300/tonne, while those in the southern parts were increased by CNY350/tonne. The price hikes were effective immediately, or as contracts allow, the company said in a statement.

Meanwhile, offers for May deliveries to India were at around $1,050-1,100/tonne CFR India, on zero import duty basis, reflecting an increase of $150-210/tonne from transaction levels for April deliveries, depending on the origin of the cargoes.

“There’s resistance [to higher prices] but I don’t intend to lower because globally [supply] is short,” a producer said.

Meanwhile, buying enquiries from non-regional traders outnumbered available offers and fuelled the bullish sentiment of suppliers in view of the current sellers’ market amid supply shortfalls in the West, which had absorbed some volumes from Asia.

In March, Singapore’s VAM exports stood at 45,627 tonnes, up by around 2.5% from the previous month, and represented a 25.2% increase from the same period last year, according to official data. Its top three export markets for the month were India, Belgium and the US.

Some buyers opted to avoid exposure to the firmer market prices as they anticipate supply conditions to ease when most VAM plants in Asia resume production in May and June.

Traders and producers, on the other hand, expect the tight supply to prevail with the onset of peak demand season in June. Furthermore, there was uncertainty that US-based VAM plants could fully resume normal operations as scheduled after turnarounds based on previous experience, they said.

“We rejected prices at the low-$900s/tonne CFR because it is far from prices in our domestic market,” a northeast Asia based end-user said.

“It’s not a good time to buy now because this is the peak VAM plant turnaround season,” he said.

In the major import market of South Korea, domestic demand has been buoyant from the downstream ethylene vinyl acetate (EVA) sector, which prompted the sole VAM producer in the country to seek spot import cargoes ahead of the impending turnaround of its VAM plant.

Lotte BP Chemical is scheduled to shut its 210,000 tonne/year VAM plant in Ulsan on 20 May for a month-long maintenance.

A couple of South Korea-based downstream EVA producers would be focussing on producing EVA grades with higher vinyl acetate (VA) content in April and May due to changing EVA market dynamics.

Buying interest for a 1,000- to 2,000-tonne VAM cargo for early May arrival surfaced at a higher $990/tonne CFR Korea this week but cargo availabilities and offers were scarce.

“I suspect $990/tonne CFR NE Asia is too rich unless the tight supply situation is sustained longer term,” a northeast Asia-based end user added.

A Japan-based producer cited workable selling indications at above $950/tonne CFR NE Asia if it had the cargo to offer.

“We will not export spot VAM cargo in April and May because we have no stock that we can afford,” another Japanese producer said earlier.

During the week ended 14 April, VAM spot prices were assessed at $900-930/tonne CFR NE Asia, $940-1,000/tonne CFR South Asia and $900-950/tonne CFR SE Asia, ICIS data showed.

Focus article by Helen Lee

($1 = CNY6.88)

Picture: Vinyl acetate monomer (VAM) is used in soles of shoes. (Photographer: Egon Bomsch / imageBROKER/REX/Shutterstock)