US VAM Destocking Nears Finish Line with Price Stability at the End of November 2023

Vinyl Acetate Monomer (VAM) destocking by the US producers almost reached their end-point as prices began to stabilize in the North American markets by November. Since June, VAM markets saw a continuous plunging of prices as companies like Celanese INEOS Acetyls observed lower economic demand till the middle of 2024. In the upstream Acetic Acid market, prices began stabilizing around USD 650-750/MT FOB on a Texas basis by September 2023, with variation largely caused by crude movements and regional supply disruptions in the Gulf of Mexico.

In North American markets, upstream Acetic Acid prices remained stabilized at around USD 600/MT in November 2023. Cumulative destocking in the markets reaching the upstream Acetic Acid market has led to Celanese production units cutting down production or taking their acetic and VAM plants off-stream. Recently, Acetic Acid and VAM units from La Porte, Texas, saw the implementation of Force Majeure by LyondellBasell to control the falling acetic acid and VAM prices. Market experts observed that crude prices in VAM or Acetyls' value chain upstream supply chain were traded at similar prices, reflecting the deep downsizing of inventories and negative cash flows in the market. Analysis revealed that chemical margins reduced to as low as USD 10/MT Acetic Acid and USD 12/MT VAM prices in November 2023. US markets saw a fall in demand for downstream Ethyl Vinyl Acetate, a Solar PV component, as the global PV market remains muted due to lower supply challenges of major components and uncompetitive pricing. Inflations Reductions Act 2022 limited the Chinese imports of VAM in American markets, tightening the supply market, but the market recalibrated itself as demand sentiment significantly reduced as Winter hit Western and southeastern regions, pulling down demand for Solar in US markets and subsequently, VAM. Energy prices remain deflated in the US on the back of weakening demand due to high interest rates, Middle East conflicts, and global economic uncertainty. US and Europe retail sales volume triggered a sell-off by market participants. The market players anticipate a "longer and slower" recovery in the Western Hemisphere.LyondellBasell and Celanese Corporation both expect weaker demand sentiment in Q4FY23 and demand recovery only in the second half of 2024.

Asian markets continue to observe rising mixed sentiment while largely remaining bearish despite the Chinese economy observing signs of recovery. YoY improvements in EBIDTA and profits by Chinese companies in VAM markets are attributed to lower base effects as the Chinese economy largely remained shut in FY22, while a deeper dive into the number reveals structural challenges due to global trade volumes, capacity additions, elevated feedstock pricing and declining chemical margins. Asian VAM supply chain, according to market participants, continues to remain overstocked and is rallying around Chinese demand and numbers. It is largely anticipated that Chinese stimulus may not have a longer effect than intended as financial and debt burdens continue to increase.