VAC Market to Be More Competitive   

Output: growing in step with consumption

Data from Chinese authority show that China's vinyl acetate (VAC) capacity reached 1.605 million t/a and that domestic manufacturers produced approximately 1.1 million tons VAC in 2010, up 18.3% from 2009. The number of VAC manufacturers amounts to fifteen and the top five among them occupy over half of domestic capacity and output (table 1), including Celanese (Nanjing) Chemical as the largest manufacturers with its 300 000 t/a VAC plant, which contributed 220 000 tons VAC in 2010, 20% of China's total.
    On the other hand, the apparent consumption of China-made VAC in 2010 was 13.1% higher than in 2009, with the volume approaching 1.34 million tons. Unlike twenty years ago when almost all VAC output was used for PVA (polyvinyl alcohol) production, there have been great changes in the consumption structure of China-made VAC, and other applications such as polyvinyl acetate and relevant esters now take a large share of total VAC consumption. It is believed that new VAC applications will be the main stimulant increasing China's VAC consumption in the future.
    Fig 1 shows China's VAC consumption structure in 2010, and obviously PVA production still consumes a fairly high percentage VAC (84.1%). However, the proportions of EVA copolymer and poly-VAC have respectively reached 4% and 8.6%, rising remarkably.

Little change in export

In 2010, about 257 000 tons of VAC were imported to China - almost the same volume as in the past few years. VAC imported from Taiwan, the United States, Korea and Saudi Arabia occupied about 95% of total. Over 250 000 tons of imported VAC was delivered to Jiangsu, Guangdong, Shanghai and Shanxi provinces. The main importing companies are centralized in Jiangsu province, including Chang Chun Chemical (Jiangsu) Co Ltd, Dahua Group Dalian Chemical Industry (Jiangsu) Co Ltd and Nantong Chemical & Light Industry Co Ltd.

New projects: to be expected

It is predicted that China's VAC capacity will be 2 million t/a at the end of 2011, although these may contribute little to this year's overall output. However, output might be steady at 1.2 million tons as long as existing VAC plants operate at 70%.
    Encouraged by strong downstream demand, new or expanding capacity has been scheduled by many domestic VAC manufacturers and approximately 1.5 million t/a of VAC capacity will emerge in China in the next three to four years (table 2).

Weak demand in 2010

Due to the weak demand and other influencing factors like import, domestic VAC prices remain grim in 2010 despite a big rise in the third quarter. Figure 2 shows VAC price movements in 2010, clearly indicating the shortness of diversification in China VAC industry because its price was easily shaken by one or two factors, but it also expresses few market opportunities for VAC manufacturers by the following analysis:
    January to March: the demand for VAC were in recession, however domestic VAC plants kept up normal operating rates and the import volume rose monthly, keeping prices low.
    April to July: statistics showed a downtrend of VAC in manufacturers' inventories in 2010, while traders stored more than before, showing that the supply was relatively sufficient. However, demand was still weak, so the price movements stayed similar to the first quarter of the year, and the imbalance of supply and demand tended to become a more serious problem.
    August to the middle of October: the coming of high PVA demand brought high consumption of VAC, and VAC manufacturers coordinated with traders to push VAC prices up until the middle of September. Then high prices motivated some consumers to cut back on purchasing, so the up-trend of prices slowed down but kept rising.
    The end of October to December: the shock of high prices had already spoiled the VAC market, and the suppliers increased shipments in order to avoid loss. On the other hand, demand in the VAC market tended to be no better than a few months earlier, causing prices to fall from the end of October to the end of 2010.

Future: tight supply is a thing of the past

Newly-built VAC plants and expansion projects will be completed in China over the next three or four years. Thus VAC industry experts predict capacity will exceed 2.8 million t/a by the end of 2013 - more than double that of 2008. Therefore, the situation of demand exceeding supply, which emerged before 2010, might not reappear in China's VAC market, because the surplus capacity will result in a buyer's market and even relatively serious oversupply.
    Nevertheless, China VAC manufacturers still have a  possibility to make breakthroughs if they study the characteristics of China's VAC demand:
    1. Geographically, China's VAC supply is collocated with demand.
    2. Imbalance in VAC downstream market: conventional PVA production is still main use of VAC in China and most VAC producers are trying to extend new applications.
    3. Development of applications like poly-VAC or EVA copolymers is good but little has changed so far in the consumption structure.
    4. Development of VAC downstream products will keep going up and the rate of increase will be relatively stable in the next few years.
　　In addition, the growth of China's VAC capacity brought a downtrend of the import volume in recent years, while the price of domestic VAC also declined, hence the profit of imported VAC is squeezed. In this circumstance, overseas VAC giants have made strategic geographic shifts to China and built a mass of VAC plants in China which is another reason for overcapacity here.
　　
　　Table 1  Top 5 VAC companies in China in 2010
　　Company    Capacity(kt/a)    Output in 2010(kt)
　　Celanese (Nanjing) Chemical    300    220
　　Sinopec Sichuan Vinylon Works    200    147
　　Anhui Wanwei Updated Hi-Tech Material Industry    150    107
　　Sinopec Shanghai Petrochemical Company    120    87
　　Yunnan Yunwei Group    100    57.1
　　Total    870    618.1
　　Proportion of China's total    54.2%    56.2%
　　Source: CCR
　　
　　Table 2  Capacity expansion of domestic VAC plants
　　Company    Capacity(kt/a)    Time for start-up
　　Sinopec Sichuan Vinylon Works    100    2011
　　Shandong Tengzhou Chenlong Energy Group    100    Apr-2011
　　Yunnan Yunwei Group    200    2011
　　Anhui Wanwei Group and Inner Mongolia Baiyanhu Chemical Co Ltd    200    2012
　　Jiangsu Sopo Group    330    2013
　　Guodian Younglight Energy Chemical Group    300    Jun-2013
　　Dongfang Xiwang Baotou Rare Earth Aluminium Industry    300    N.A.
　　Total    1530    
　　Source: CCR
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