Deteriorating Cost Support and Slump in Demand Push VAM Prices Further Southwards
Deteriorating Cost Support and Slump in Demand Push VAM Prices Further Southwards

Deteriorating Cost Support and Slump in Demand Push VAM Prices Further Southwards

  • 17-May-2023 2:07 PM
  • Journalist: Rene Swann

From the start of May 2023, Vinyl Acetate Monomer (VAM) has maintained a declining price trend in the USA due to declining feedstock Ethylene and Acetic acid prices and sufficient inventories. Market players reported that there had been a decrease in the demand for VAM in the global market amid low consumption in downstream industries.

The dwindling prices of feedstocks are significantly impacting the VAM industry. VAM is primarily produced by reacting ethylene and Acetic Acid, so plunging behavior in the prices of these raw materials directly lowers the production cost. With the recent weakness of upstream WTI crude oil, Ethylene prices have witnessed a considerable drop, thereby lowering costs for VAM producers. Similarly, prices of Acetic Acid have been affected by the decline in demand from end-use industries. The lower feedstock prices have resulted in limited cost support for the VAM market.

According to market participants, the growth of VAM has largely been deprived due to its weakening demand as a raw material in the production of Polyvinyl Acetate (PVA), Polyvinyl alcohol (PVOH), and Vinyl Acetate-Ethylene (VAE) copolymers. Furthermore, downstream buyers have become cautious in their purchases, trying to avoid accumulating bigger stocks due to anticipated negative price corrections.

In the meantime, total new orders for VAM are falling from various end-user industries, especially the paints and coating sector. The underperformance of the paints and coating sector in the second quarter of 2023, amid the deepening downturn in the construction and automotive sectors, has directly reduced the utilization of VAM, a key building block chemical in the production of paints, adhesives, and varnishes.

Considering the weak enthusiasm for downstream purchases, light market transactions, and a pessimistic mentality within the industry, VAM manufacturers have reduced their production rates as they are reluctant to build new stock. However, in case of any urgent orders, manufacturers and suppliers have enough stock to meet their customers' demands.

With tightening financial conditions amid a hike in interest rates by US Federal Reserve and general uncertainty in the global economy, overall consumer purchasing confidence is affected. Consequently, the US manufacturers are cautious about a further dip in overall sales and thus lower the prices of VAM to boost shipments, providing a welcome relief for downstream players.

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