Vinyl Acetate Monomer Prices Stabilize in USA As Cost Pressure Mounts

Texas (USA): Vinyl Acetate Monomer (VAM) prices stabilized in the first week of March 2024, with feedstock acetic acid and ethylene prices showing a bearish trend amidst declining trades and exchanges. Stabilization in prices was achieved after a month of a strong bullish trend observed in January, with prices rising by 27%. The bearish trend in feedstock acetic acid prices corresponds to the long-term demand cycle of VAM and other downstream derivatives, with the FY24 US domestic markets expected to remain weaker until the first half of FY24, with recovery being projected by the end of FY24. ChemAnalyst’s forecast now revises the recovery post-summer in VAM and acetic acid markets.

In US markets, VAM prices recovered to USD 1200/mt by the end of February in the domestic territories as LyondellBasell and Celanese halted production, with Force Majeure on acetic acid and VAM supplies observed throughout Q4FY23. Price support in export markets remained minimal as Chinese and Middle Eastern capacities continued to oversupply the world market. Exports to Brazil and Mexico slowed down on a month-over-month (MoM) basis but remained higher than FY23 in January.

ChemAnalyst’s inquiries in VAM markets revealed that interest rate cut momentum is fizzling out as producers now expect delayed rate cuts, with another round of destocking expected to begin shortly. US Trade Statistics revealed that destocking in FY23 decreased the average export price by 29% year-over-year (YoY) basis over FY22, which is in line with producers streamlining their inventory expectations for FY23.

However, price acceleration in the early months of FY24 was driven by falling mortgage rates and increasing business and consumer confidence, despite supply chain disruptions across the Suez Canal and Panama Canal. With the onset of February and East Asian markets going offline, import volumes declined, and newer prices by the end of February showed similar quotations for VAM from the US to East Asia. Demand sentiment for imports, though gradually showing improvement, has not led to upward price revisions in US markets as VAM suppliers assert for a delayed recovery in demand.

Upstream acetic acid markets are observing another round of destocking in the next quarter of FY24, with LyondellBasell announcing another round of Force Majeure on supply from La Porte.

In European and East Asian markets, challenges pertaining to supply continue to persist with multiple plants of acetic acid and VAM in China going offline. Acceleration in prices in Asian markets seems to remain temporary, with Chinese adhesives and wood markets indicating an uptick due to robust consumer spending for the Chinese Lunar New Year, but producer prices fell 0.2% again in February, indicating structural challenges in Chinese manufacturing. This is also reflected in VAM supply lines in China as multiple plants remained offline after the holidays, partially due to lower supply of Methanol but mainly due to weak demand sentiment.

The European situation is currently further tightened due to delayed shipments from the US, Asia, and the Middle East. European VAM prices remained subdued, corroborated with timber markets remaining underpriced despite gains over FY23 February.

ChemAnalyst forecasts a 3-4% uptick in prices monthly across global markets due to supply tightening of feedstock and inventory reduction measures being undertaken to recover prices in the VAM value chain with demand recovery tailing supply.