US and Asia VCM Prices to Edge Up in August 2024 Amid Supply Issues Despite Low PVC Demand

The VCM (Vinyl Chloride Monomer) market in the Asia and USA is expected to experience a marginal surge during August 2024 despite low downstream PVC consumption. The market has been under considerable pressure as the futures downstream market's decline has largely been mirrored in the spot market, compounded by supply and demand dynamics.

In Asia, VCM market participants are facing growing difficulties in moving shipments, as dealer offers continue to reach new highs. Downstream buyers have shown little interest in inquiry-based purchases, instead opting to focus on immediate spot prices, which has helped maintain a stable market atmosphere. Prices for pending orders remain relatively high, with trading activity primarily driven by essential needs, resulting in a consistent market environment. On the cost side, domestic prices for Ethylene, a crucial feedstock for VCM production in the region, have been rising since July and have stabilized in August. This persistent tightness in the upstream Ethylene market has provided only limited cost support for VCM producers in Asia.

From the supply perspective, ocean freight continues to face substantial challenges, with vessels fully booked through August and strong demand from Asia anticipated to continue into the third quarter. Additionally, port congestion and strikes in key regions are further exacerbating the disruptions. Air freight rates have increased for six consecutive months, fueled by rising cargo volumes and capacity constraints, especially on routes from Bangladesh and Asia to Europe and the U.S.

Furthermore, the supply of VCM in the U.S. has been under significant strain in 2024 further affecting the price trend in August 2024, primarily due to challenges faced by major producers like Olin Corporation. Despite expectations of improved demand for chlor-alkali and vinyl products, Olin reported slower-than-anticipated progress during the company's second-quarter earnings release on July 25, 2024.

Olin experienced a modest boost in demand during the second quarter, driven by seasonal factors. However, the unexpected impact of Hurricane Beryl, which struck in early July, has disrupted production and further complicated supply dynamics during August 2024. While many plants at the site have resumed operations, critical repairs are still needed before VCM production can fully restart.

This disruption has had a pronounced effect on Olin's financial performance. The decrease in sales was also influenced by the operational challenges at the VCM plant.

As the company works to restore full operations, the U.S. VCM market is likely to remain constrained, with potential implications for downstream industries reliant on this critical chemical.

As per ChemAnalyst, the VCM market in the Asia and USA is expected to experience a marginal surge during August 2024 despite low downstream PVC consumption. The market has been under considerable pressure amid constrained trading activities and higher production costs.