VAM Prices Show Bearish Trend in the US Market, Stagnancy in Europe

Vinyl Acetate Monomer (VAM) prices took different paths across continents in the first week of September 2023. Europe saw stable prices, while the Americas experienced a decline and Asia saw an increase. These global trends reflect the dynamics of the Acetal supply chain on a large scale. However, the supply chain of VAM and its downstream products faced significant challenges due to inflated energy prices worldwide. VAM is a crucial component in the production of adhesives, paints, and coatings, which are widely used in automobiles, housing, and consumer products.

In the Americas, VAM prices dropped significantly in the first week of September due to decreased demand from domestic consumers, high energy costs, inflated material pricing, and a decline in exports. The United States, a major producer and net exporter of VAM in the region, saw a roughly 7% decrease in FOB Texas VAM prices, which continued to decline into the second week. Market inquiries revealed that demand for goods like housing and automobiles declined due to high inflation expectations, increased living costs, energy prices, and inflated interest rates. Despite this, VAM inventories with manufacturers remained sufficient. However, operating capacity was limited due to high energy costs and a tight labor market. Exports to China also decreased significantly due to a decline in the real estate and construction sectors. To manage inventories, LyondallBasell reduced their prices as inflation eased. As the prices decreased in the U.S., similar trends were observed in countries like Mexico and Brazil, which rely on imports of Vinyl Acetate and its downstream products.

In Europe, VAM prices remained stable in the first week of September, continuing the previous month's trend. German markets recorded a stable price of FD Hamburg USD 1062/MT in the September 1st, 2023 week. Market participants reported subdued overall demand, but stable prices were maintained due to significant demand from the automobile sector. High inventories and energy costs led manufacturers to narrow profit margins and operate at lower capacities. A tight labor market and a decline in imports from East Asia also contributed to price stability. Unlike the Americas, Europe's price differential with the Americas is narrowing significantly due to the price cuts in the Americas. Economists predict that as inflation slows, prices of VAM will continue to decrease and reach a competitive level.

In Asia, VAM prices improved in the first week of September, marking a positive turnaround since mid-August 2023. Both feedstock Acetic acid and energy prices showed positive growth. Since Asia relies heavily on imported energy and materials, the rise in crude oil prices, driven by extended OPEC+ cuts, impacted the cost of VAM. Japan and India demonstrated significant demand for VAM, driven by the construction and automobile sectors. Japan's construction sector experienced slower but positive growth, while China and South Korea's economies remained relatively weak. The adhesive markets in India observed rising prices due to increased demand ahead of the festival season. On the other hand, the Chinese market saw a decline in export performance to high-income countries and slow domestic demand, resulting in an oversupply of VAM. Chinese demand is expected to remain weak until the first half of 2024, as inflation and unemployment numbers show no improvement among the younger population.

With the Chinese, U.S., and European economies facing distinct challenges, the global acetic acid and downstream VAM markets are expected to remain volatile. As these economies account for over 50% of the world's economy, this volatility will significantly impact the industry.