Indian VAM Market Sees Robust Growth with Seasonal Demand and VAE-Based Paint Products

Key Highlights

1. Price Surge: VAM prices reached ₹73.50/kg (Ex-Hazira), reflecting a ₹2/kg week-on-week increase, influenced by robust downstream production and rising methanol and acetic acid costs.
2. Demand Recovery: Seasonal demand from paints, coatings, and adhesives drives market optimism, alongside growing use of VAM in VAE-based paints and adhesives.
3. Supply Dynamics: Inventory liquidation increased mid-November, with traders stockpiling in anticipation of further price hikes due to high replacement costs.
4. Market Outlook: Despite feedstock volatility, the market anticipates strong trading activity with projected monthly VAM demand at 22,000 tons in India.

VAM Price Trends: Week-on-Week Hike Amid Stronger Demand

• Domestic prices of Vinyl Acetate Monomer (VAM) have increased by ₹1.5 per kg. The latest pricing details are as follows:
  ₹73.00/kg (Ex-Kandla)
  ₹73.50/kg (Ex-Hazira)
  These prices are based on 60-day payment terms.
• Meanwhile, traders are quoting even higher prices, with the prevailing market rate hovering around ₹74.00/kg (Ex-Kandla) under similar credit terms.
• On a week-on-week basis, VAM prices have risen by approximately ₹2 per kg. 
• This price hike can be attributed to stronger downstream production activities, particularly in the paints and adhesives sectors, alongside a surge in the cost of key raw materials such as methanol and acetic acid.

VAM Supply and Demand: Growing Liquidation and Seasonal Recovery

• In November 2024, VAM inventories in India remained elevated due to consistent vessel arrivals. However, mid-November witnessed a significant uptick in liquidation activity, primarily driven by growing demand from adhesive manufacturers.
• India's VAM market heavily depends on imports. Notably, a leading paint manufacturer has resumed VAE based paints , becoming the first domestic producer of this material.
• For importers, replacement costs are projected to increase, given the ongoing upward trajectory in methanol and acetic acid prices. Bulk buyers are actively stockpiling inventories in anticipation of further price escalations.
• A major importer commented on the recovery of acetic acid prices in Asia, which is fostering a positive outlook for VAM in December 2024.
• While downstream segments such as Polyvinyl Alcohol (PVA), Vinyl Acetate Ethylene (VAE), and Ethylene-Vinyl Alcohol (EVOH) exhibited subdued demand throughout November, these sectors are witnessing a recovery in December, supported by seasonal demand growth.
• Market participants remain optimistic, anticipating heightened trading activity as demand from paints, coatings, and adhesives manufacturers increases. 
• With the resumption of domestic VAM production for new product applications, Indian demand has shown a significant uptrend in 2024. The revised estimate for India's monthly VAM demand is approximately 22,000 tons.

Global Chemical Market Updates: Feedstock and Energy Trends 

• Globally, trends in key feedstock and energy markets have been mixed:
• Crude Oil: WTI prices dipped by 0.67%, settling at $68.91 per barrel.
• Naphtha: FOB Singapore prices stood at $609/MT.
• Natural Gas: Prices rose by 2.04%, reaching $3.65/MMBtu.
• Methanol (CFR China): Prices are recorded at $298/MT.
• Acetic Acid (FOB China): Prices are pegged at $325/MT.
• Sinopec Zhenhai Refining’s phase 2 expansion project completes construction, New capacity at Ningbo includes a 1.5 MMt/y ethylene plant. 
• Mitsubishi Chemical to expand synthetic silica powder capacity in Japan, Additional production at Kitakyushu scheduled to start up in September 2028.

Expert Opinion: Strategic Planning Amid Volatile Markets

• The domestic VAM market is likely to remain volatile in the short term as manufacturers of paints, coatings, and adhesives ramp up production to meet seasonal demand.
• To navigate this period of volatility, buyers are advised to adopt strategic inventory management practices. Such measures can help mitigate the impact of price fluctuations and capitalize on emerging opportunities in the evolving market landscape.