Indian VAM Market Faces Bearish Sentiment; Demand Recovery Expected Post-October

Chemical Price

• In the domestic market, VAM prices have recently decreased by ₹1/kg, now standing at ₹64/kg ex-Kandla for direct consumers with 30-day payment terms. Importers are offering to traders at a slightly higher rate of ₹65/kg ex-Kandla on 30-day credit terms.
• Bulk deals in the range of ₹62.50-63.00/kg ex-Kandla on 30-day LC terms, coupled with 30 days of storage, have been reported based on MOQ basis. This price drop can be attributed to a surplus inventory buildup at the port, with importers facing pressure to liquidate stocks.

Chemical Demand and Supply

• Throughout September 2024, VAM inventory levels have increased due to frequent vessel arrivals and lower liquidation. As India is entirely dependent on imports, with no local VAM manufacturer, these factors have significantly influenced market dynamics.
• A decrease in acetic acid prices in Asia has also contributed to bearish sentiment in the VAM market. Key consumers in the paints, coatings, adhesives, PCA, VAE, and ethylene vinyl alcohol segments have shown weak demand in September, though growth is anticipated post-October 2024.
• Expectations for increased demand from the paints, coatings, and adhesives sectors in October 2024 look promising, but some market participants expect that upcoming holidays (Navaratri and Diwali) could limit consumption in September. Thus, trade sentiment for VAM is likely to remain bearish until the end of October.
• Importers have expressed concern about a potential price crash, as VAM spot prices are currently below the import cost. Uncertainty around a price rebound, coupled with growing inventories from continuous vessel arrivals at ports, has led importers to opt for formula pricing to minimize losses given the persistently bearish outlook.
• The current demand for VAM in India is approximately 15 kt/month, with expectations of increased demand from primary consumers in paints, coatings, and adhesives post-October 2024, driven by seasonal factors.

Chemical News

• In the international market, upstream crude oil benchmark WTI prices have increased by 0.75% to $68.18 per barrel.
• FOB Singapore naphtha prices stand at $620/MT, while natural gas prices have increased by 5.41% to $2.90.
• Feedstock CFR China methanol prices have decreased by $2 to $288/MT, and FOB China acetic acid prices are at $345/MT.

Expert Opinion

Domestic VAM prices are likely to remain mixed and bearish due to ample inventory at ports, weak demand, and lower replacement costs. However, the long-term outlook may see support as demand from primary consumers in paints and adhesives is expected to grow post-October 2024. Buyers are advised to consider spot deals amid bearish sentiments until the end of October 2024.