Celanese Q3 results reflect Vinyl Acetate Monomer’s tightened supply to continue, downturn to persist till 2025

Celanese Corporation, a key player in acetyls and engineered materials, has announced strategic adjustments after reporting disappointing third-quarter results.

In response to weaker demand, particularly in automotive and industrial materials, Celanese plans to idle plants globally through the end of 2024. This move aims to lower production costs, generating an anticipated USD 200 million in Q4 inventory releases. The idling will impact 10 Engineered Materials sites, alongside plants in Singapore and Frankfurt that produce acetic acid, Vinyl Acetate Monomer (VAM), vinyl acetate emulsions (VAE), and esters. In Frankfurt, the VAM facility will be on standby to serve as swing capacity, allowing Celanese to adjust supply based on demand trends.

Despite these operational changes, Major suppliers face a challenging market as VAM supply exceeds demand. Weak construction activity and declining solar panel production, key VAM applications, are putting downward pressure on prices. Additionally, in China, the market for undifferentiated nylon polymer, another industrial staple, is experiencing an oversupply. Celanese has noted declining demand across coatings, paints, and construction sectors. The solar panel industry, in particular, has surplus inventory, leading to reduced EVA demand. With new VAM capacity entering the market, a market participant anticipates continued weakness in VAM prices into the fourth quarter.

To support financial stability, VAM suppliers is taking several measures to reduce debt and improve its balance sheet. The company will cut its quarterly dividend by 95% starting in Q1 2025, implement a USD  75 million cost reduction program targeting SG&A expenses by the end of 2025, and lower capital expenditures to USD 400 million, a decrease from 2024 levels. Additionally, Celanese is closing on a 364-day prepayable term loan of up to USD 1 billion to meet a USD 1.3 billion maturing debt in Q1 2025.

The financial challenges faced by US suppliers reflect a broad slowdown across its end markets. According to the COO, automotive demand in North America and Europe saw a sharp drop, leading to production pullbacks. In Asia, demand remained relatively steady but did not follow previous growth trends. Meanwhile, global VAM demand remains subdued, and prices are unlikely to see near-term improvement.

Looking toward Q4, Celanese expects heavier-than-usual destocking in automotive and industrial sectors, with Engineered Materials facing an estimated USD 40 million impacts. Seasonal product changes and temporary idling should add another USD 30 million in costs. The company has projected Q4 adjusted earnings per share at USD 1.25, almost half of its Q3 results, signaling a challenging outlook.

In summary, despite its recent synergies from the Mobility and Materials acquisition and the Clear Lake acetic acid expansion, Celanese is bracing for continued market pressures, particularly in VAM. While supply will remain tight, demand and pricing for VAM are likely to remain weak through Q4.