European Vinyl Acetate Monomer Prices to Accelerate Further in May 2024

Hamburg (Germany): Vinyl Acetate Monomer (VAM) prices have risen in May 2024 in Europe despite a slowdown in demand, driven by supply tightening and stringent cost control strategies. Prices have been rising since January 2024 in Europe, following the renegotiation of gas and energy supply contracts. March 2024 saw significant developments in VAM and other petrochemical markets as downturns eased partially due to increased operation of European crackers and inventory pressures. The VAM market has largely remained bullish, with PVAc demand from adhesives, packaging, and paints gradually recovering, especially in the Netherlands, France, and Italy. However, production statistics indicate that a full recovery to pre-pandemic levels won't occur before 2025, with prices consistently remaining 38% higher than pre-pandemic levels.

European VAM prices, as assessed by ChemAnalyst, moved upwards by USD 10/MT in the second week of May 2024, marking a 23% year-to-date increase. This rise is partly attributed to increased freight charges and safety stocking by European markets to hedge against potential embargoes on methanol supply from the Middle East. However, ChemAnalyst’s research concluded that rising freight charges alone do not explain the price movements.

Rising crude and gas prices by the end of February 2024 contributed to increased spot methanol and VAM prices, with inventory pressures and demand support being additional factors. Spot Dutch TTF gas prices were assessed at USD 8.9/MMBtu, which is 3.68 times higher than US gas prices for 2024 spot volumes, yet still 53% lower than the October 2022 spot peak.

Research revealed that VAM derived from gas deliveries at USD 13.36/MMBtu led to increased prices in the acetyls chain, pulling up the intermediate VAM and methanol markets by 77% from January 2023 to March 2023. This spike triggered a reduction in VAM output and demand by nearly 50%, causing a price free fall over the next three months as European suppliers held onto their inventories until June 2023. From January 2024, new gas contracts intensified inventory pressures and continuous downturns forced supply constraints.

In April 2024, despite falling freight prices across the Asia-Europe route, VAM prices remained high, partly due to the continued operation of European plants. A Pricing Analyst at ChemAnalyst identified that US suppliers had margins extending to USD 270-280/MT for methanol and around USD 370-380/MT for VAM production, while European suppliers had significantly lower margins of USD 50-150/MT for methanol and USD 200/MT for VAM. Nevertheless, European VAM margins remained positive this year, contrasting with negative margins the previous year. Supply disruptions in Texas and Louisiana due to hurricanes have affected deliveries to Europe, yet prices have not risen proportionately and are expected to increase by the end of May 2024.

VAM industrial trends and downstream PVAc and end-use industry trend studies suggest that VAM prices are set to ease by the end of the third quarter when gas prices are expected to rise due to heating requirements and annual plant maintenance. Prices are expected to ease off as the intermediate value chain builds up strong inventories.