China VAM market to extend gains on high cost, tight supply

SINGAPORE (ICIS)–Domestic vinyl acetate monomer (VAM) prices in China are expected to increase further amid tight availability of spot material and costly feedstock.

Offers in east China this week were being quoted at Chinese yuan (CNY) 8,000/tonne ($1,231/tonne).

In the week ended 5 January, prices stood at CNY7,750/tonne, up by CNY300/tonne from the previous week, according to ICIS data.

Supply further tightened last week amid transportation controls following heavy snowfall in the central and eastern China provinces. Deliveries of cargoes currently in transit are expected to be delayed by three to five days, industry sources said.

Producers based in north and northwest of China, including Sinopec Great Wall Energy and Chemical, Shanxi Sanwei Group, Ningxia Dadi Coal Chemical, have cut production last week due to insufficient raw materials, delivery of which were affected by the transportation controls.

Major Chinese producers raised their VAM ex-works prices by CNY200-400/tonne last week.

VAM prices have been on an uptrend since mid-December 2017, gaining 5.5%, due to tight supply and backed by strong gains in the feedstock acetic acid market.

Acetic acid prices in east China have jumped 28.9% over a two-month period from 11 November 2017. Prices stood at CNY4,800/tonne ex-tank on 11 January 2018, according to ICIS data.

High feedstock costs prevent Chinese VAM producers from beefing up production. In the week ending 5 January, domestic VAM plants ran at an average rate of 43%.

The average run rate has fallen below 50% in December 2017, even lower than the average rate of above 53-59% in October and November as the spike in feedstock costs has been squeezing the producers’ margins.

Lower overall production is partly due to the shutdown of Sinopec Chongqing SVW Chemicals’ 500,000 tonne/year plant on 25 December. The unit is expected to restart in end-January, according to a company source.

Overall VAM demand from downstream markets have remained lackluster, but is expected to have a slight pick-up ahead of the Lunar New Year. The Chinese markets will close for a full week on 15-21 February for the Lunar New Year and Spring Festival.

Post-holiday, VAM supply could tighten further with the scheduled shutdown of Sinopec Great Wall Energy and Chemical’s 450,000 tonne/year plant in Ningxia province in March for a 35-day turnaround.

Focus article by Yvonne Shi and Anna Xiang

($1 = CNY6.50)

Picture: Running shoes. Vinyl acetate monomer (VAM) is used on soles of sports shoes. (Source: WestEnd61/REX/Shutterstock)