Vinyl Acetate Monomer (VAM) prices remained sluggish and declined by a factor of 45% in FY23 owing to lower demand sentiment and deflating energy and feedstock prices. This deflationary trend occurred as inflation control measures were employed globally to manage high inflation triggered by supply disruptions and COVID-19. VAM markets across the globe initially remained bullish in the first quarter of FY23, anticipating lower inflation expectations. However, they turned negative, leading to large-scale destocking of VAM and acetic acid markets by US producers. The feedstock prices remained steady despite the decline in VAM and acetic acid prices, as OPEC+ controlled volume to arrest falling petrochemical prices. FY23 ended with subdued VAM demand sentiments, higher interest rates, and contracting manufacturing to control inflation.

In FY24, North American markets are anticipated to recover demand sentiments in the VAM value chain, as prices have already been steady since December 23 despite weak manufacturing and lower business confidence registered in December. LyondellBasell and Celanese force majeure from La Porte Texas last month stabilized supply across the globe. American VAM markets are anticipated to recover as the inflation premium on mortgages has declined significantly, pulling down average mortgage rates to 6% since the FY23 peak attained at 8% in October. Mortgages are further anticipated to fall to 5% in FY24, coupled with lower premiums on construction companies to increase the supply of affordable homes across the US, as stated in the report by Morgan Stanley. This is giving green shoots for recoveries in VAM and polyurethane value chains.

Mexican and Brazilian markets continue to observe a significant amount of VAM being dumped by US producers at lower prices than domestic producers. ABIQUIM anticipates tough times for the Brazil petrochemical industry in FY24 as energy prices are expected to rise due to high crude and gas demand from two major cores - USA and China. Brazil is gearing up for strong oil production in FY24 to minimize the energy impact on Brazil. Acetic acid and VAM markets are likely to remain moderate in the South American giant as economic recovery and manufacturing are anticipated to recover by the end of FY24, as experts assert. Mexico, on the other hand, is anticipated to see robust VAM and downstream derivatives demand owing to the rise in 'nearshoring' activities, a robust automobile sector, increased crude production, and availability of USMCA benefits as the US economy recovers. One point of contention includes regional political uncertainty and the stoppage of rail between Mexico and the USA in the last month, which has triggered investors to remain cautiously optimistic. Nevertheless, nearshoring continues in Mexico, and projections by experts suggest that the VAM and construction market are poised for recovery.

Europe and Asian markets are also anticipated to recover, though not as robustly as the USA, as manufacturing in Europe continues to stay in the negative territory for the thirteenth month. Chinese recovery is lackluster, with initial signs showing recovery in services while manufacturing activities in December show contraction. With VAM prices down by 45% and continued force majeure and downturns across Chinese supplies, coupled with lower methanol deliveries from Iranian cargoes to China, signals further weakening of recovery prospects in FY24. Chinese inflation continues to be much lower than anticipated, as reported by Bloomberg, causing Asian markets to weaken. Furthermore, European markets, especially data from the Netherlands, show that recovery in the construction market is on the horizon, with housing prices showing an increment of 3% in December 23. Germany and the UK are anticipated to follow the trend in the coming months, as the Halifax index showed marginal recoveries in the construction markets. Saudi VAM sales are anticipated to improve in the coming months owing to the global recovery anticipated by the IMF.