US VAM Prices Ends Q1 2024 on a High Amidst Short Supply

Texas (USA): Vinyl Acetate Monomer (VAM) prices ended on a higher note in the first quarter of FY24-25 as supply tightening and downturns continued. Demand sluggishness persisted throughout the period, though green shoots in Europe and Asian markets by the end of the period allowed US suppliers to undertake another rate hike before the shipping off-season begins.

The first week of April 2024 was marked by a slowing of newer VAM deliveries for the coming quarter to Europe and Latin America. Domestic demand has also slowed down due to sufficient inventory stock for the current nature of the supply situation, owing to the emerging geopolitical situation in the Middle East.

In US markets, prices of VAM continue to be supported by supply tightening due to force majeure of LyondellBasell to keep the prices afloat, as US suppliers suspect Chinese oversupplies could flood the market as global inventory pressure for VAM intensified in the fourth quarter of FY23-24.

This marked alignment of production of VAM was also supported by a gradual improvement in demand with adhesives, paints, and other markets showing stronger signs of recovery as manufacturing downturns eased in the first quarter of FY24-25. Two distinct patterns emerged; the month of March observed a fall in discounts for the contracts to European importers. FD Antwerp in the first quarter of FY23-24 for VAM deliveries was assessed at USD 1370/MT with three downward price revisions in their delivery schedules, pulling the prices around USD 1140/MT by the beginning of the second quarter FY23-24.

For FY24-25, prices saw two upward revisions since January 2024 for European deliveries with FD Antwerp assessed around USD 1270/MT, Q-o-Q basis as European manufacturing downturn eased with Acetyls suppliers in Europe undertaking operations at higher rates as they secured cheaper methanol supply contracts and record high gas levels due to a warmer winter.

This situation has led to an acceleration in spot prices in Europe in the last three weeks as customers downstream registered higher orders from consumers than previously planned. UK domestic VAM supplies surged with Halifax index showing construction recoveries and a fall in pending orders, with lower import contracts offered to Korean and Middle Eastern suppliers, partially due to supply chain disruption in the Red Sea.

On the other hand, discounts on VAM offered to Mexico and Brazil importers showed an upward movement as downturns in their industrial production intensified in the months of February and March 2024. This is attested to downturns and lower crude production and sales overseas due to high-interest rates and lower private investment to tackle the inflationary situation. ChemAnalyst has maintained a mild bearish forecast for the VAM prices in the next quarter based on the current supply situation. Newer contract prices have been revised upwards from the US for the coming months, although the contract prices are still lower than spot prices, which is expected to bring the spot prices of VAM at par with the contract prices by the end of the second quarter of FY23-24.