Asia VAM supply stays ample despite China output cuts
Asia’s vinyl acetate monomer (VAM) supply may stay long despite production cuts in China amid seasonally weak demand.
Consumer confidence has weakened against the backdrop of escalating US-China trade tensions, as well as lower upstream ethylene values which eroded VAM prices to levels last seen in February/March 2017.
During the week ended 12 July, prices of ethylene-based VAM across Asia were assessed flat week on week at $840-970/tonne CFR (cost & freight) NE (northeast) Asia; $840-860/tonne CFR SE (southeast) Asia and at $830-850/tonne CFR South Asia, ICIS data showed.
Prices of non ethylene-based VAM from China rose $10-25/tonne over the same period to $810-830/tonne CFR SE Asia; $830-855/tonne CFR South Asia; and $745-755/tonne FOB (free on board) China, the data showed.
A recent rebound in China’s domestic and export prices amid output cuts at two Sinopec plants provided respite to Asia’s VAM downslide since April.
The southeast Asia and India VAM markets are heavily influenced by supply of non ethylene-based VAM cargoes from China, for applications in the downstream adhesives/emulsions sector.
In the week ended 12 July, China’s Sinopec Sichuan Vinylon cut operating rates at its VAM plants with a combined capacity of 500,000 tonnes/year in Chongqing to around 80% from 90% previously.
Sinopec Great Wall Energy and Chemical likewise capped the operating rates at its 450,000 tonne/year plant in Ningxia province at 60% since late June, from 80-90% previously.
In the week ended 12 July, China’s average plant utilization rates declined to 68% from a high of 80% in mid-June, when two previously idled plants were restarted.
For most of the second quarter, VAM plants in China ran at an average rate of 55-60%.
Offers for August-loading cargoes rose to $750/tonne FOB China and above, versus $730-750/tonne FOB China in the previous week.
Outside China, most VAM plants are operating relatively normally with the bulk of turnarounds completed.
Saudi Arabia’s International Vinyl Acetate Company (IVC) is due to restart operations at its 330,000 tonne/year plant on 18 July following a turnaround.
Availability of southeast Asian-origin cargoes were constrained to one source as another source is inclined to skip July shipments due to its low inventories caused by reduced production since early April.
Taiwan’s Dairen Chemical Corp is due to increase operating rates at its 350,000 tonne/year VAM plant in Singapore in August, to build up inventory ahead of a scheduled 45-day maintenance at the unit in October.
On the demand side, southeast Asia is expected to see stock replenishments for August- and September-delivery cargoes.