North American Suppliers Cut VAM Supplies, Impact on Prices Visible

Houston (Texas, USA): Vinyl Acetate Monomer (VAM) prices have surged globally due to consistent force majeure events impacting acetic acid and VAM prices. VAM prices had previously dropped by 33% YTD as the supply chain relaxed when the US Fed aggressively increased interest rates to control inflation, ranging between 5.25% and 5.5%. Another development included the US Fed hinting at 3 rate cuts in FY24, contributing to bullish markets and factoring in the subsequent price surge.

In North American markets, LyondellBasell, INEOS, and Celanese independently decided to cut supplies of VAM and glacial acetic acid. Market analysts believe that upstream Methanol prices turned bullish significantly, altering market dynamics and making downstream products cheaper than the feedstock. It was observed that Methanol prices surpassed Acetic acid prices in the first week of December 2023, prompting major producers to take action. This resulted in a subsequent revision in downstream volume prices, with new orders reflecting increases in the range of 3-5% WoW basis. The US VAM market showed a bullish trend after the US Federal Reserve announced rate cuts in FY24, triggering an expansion of inventories by suppliers. Despite rising hostilities in the Red Sea, oil and gas markets turned bearish at the announcement. Mexican VAM markets reacted positively as demand improved, with major companies such as ExxonMobil and Celanese transferring investments to Mexican areas, a phenomenon known as 'nearshoring,' to decouple their supply lines from Asia. A Mexican downstream supplier revealed that Mexican markets are attempting to align with the US market, capitalizing on the largest consumer market.

In European and Asian markets, VAM prices rose due to force majeure and supply disruptions in Northern Europe caused by lower port operability. Asian VAM markets, largely dependent on imports from the Middle East and Northern Europe, are experiencing a significant rise in premiums as Red Sea tensions, caused by Houthi rebels, continue to pose threats. Indian markets saw the steepest rise, partially due to improved demand. An inquiry with a Chinese supplier revealed that Chinese markets are facing frequent outages in upstream acetic acid supplies, leading to price increases in downstream VAM and Ethyl Vinyl Acetate markets. The Chinese government continues to provide stimulus to revive construction demand, while commercial construction is showing signs of recovery, and VAM demand from paints, coatings, and adhesives is experiencing a marginal uptick due to year-end restocking and increased consumer spending.

ChemAnalyst analysts forecast a rising trend in VAM prices despite moderate demand due to rising premiums, supply disruptions, and increased Chinese growth. A 2-2.5% MoM increase in VAM prices is anticipated in Asian markets, while European and American markets are expected to restock in FY24, with demand remaining weak in December 2023 due to weaker demand and logistical challenges in Northwestern Europe.