Vinyl Chloride Monomer (VCM) prices experienced a pause in the Asian market during January 2024, supported by stable downstream PVC demand and limited supplies. Further, shippers and exporters in Asia are expressing worries related to the Red Sea, as rising freight rates, stemming from a shortage of container vessels, are affecting transactions within the downstream PVC industry.

During the first half of February 2024, Currently, the Asian VCM market participants have halted price movements due to the narrowing gap between demand and supply, which has become a critical factor. In a noteworthy development, upstream crude oil prices have experienced an upswing, reached their peak and settled at high levels. The March contract for West Texas Intermediate rose by 95 cents, equivalent to a 1.24% increase, closing at USD 77.87 per barrel. Simultaneously, the Brent contract for April concluded at USD 82.77 per barrel, marking a 0.94% rise or an increase of 77 cents. Despite a higher-than-anticipated inflation rate in January, with the consumer price index growing by 3.1% annually, oil prices retained their gains. As a ripple effect, this surge in the input costs for VCM led to a reduction in the production rates and contributed to the tightening of supplies across the globe during this time frame.

In a recent analysis, VCM prices in certain Asian countries have witnessed stability. The Downstream PVC market maintained a continued downturn in production activities, amidst the closure of construction sites and considerable ample inventory pressure on the manufacturers. Consequently, to facilitate shipping, the VCM market is taking a prominent unchanged price trajectory for the time being.

From the downstream PVC demand perspective in the APAC region, the downstream consumption of VCM in the Asian market in the first half of February 2024, was affected by the muted downstream market transactions amid a slow economic recovery.  Additionally, Ships navigating through the Qiongzhou Strait off the Guangdong province coast in China were halted last week due to dense fog. Simultaneously, widespread snowfall and freezing rain forecasted are anticipated to create travel challenges for millions in the coming days disrupting trade routes in the VCM regional market. Ahead of the Lunar New Year holiday, downstream markets are displaying a varied pattern, Thus, VCM prices experience stability due to pre-holiday restocking and supply constraints. This occurs against the backdrop of an overall subdued downstream PVC procurement sentiments for VCM.

As per ChemAnalyst, VCM prices in the Asian market are expected to exhibit a slow rebound in the coming weeks as the pre-holiday restocking has to begin, and producers already witnessed constrained supplies. Meanwhile, concerns about a potential imbalance in the supply-demand fundamentals are prompting uncertainties regarding the sustainability of the ongoing cautious trend of VCM prices as market participants resume activities following an extended holiday period.