Falling trend of Vinyl Acetate Monomer, popularly known as VAM, which was started in October last year is continuing even today much to the delight of adhesive manufacturers. Otherwise, it was a challenging time for the adhesive manufacturers who are facing subdued demand for their products. For example, market leader Pidilite could register only 6% growth in the first quarter of the current year was able to maintain its margins mainly because of softer VAM prices.
The average VAM price for the first quarter of this year is $980/tonne as against $1325/tonne during the same period in the previous year. VAM price has gone further down and is presently ruling at $880/tonne. Also, rupee value which was volatile last year has become more stable now. Thus, it’s a double whammy for the adhesive manufacturers. VAM which is a crude oil derivative is the main raw material used in adhesive production.
India imports VAM from China, Saudi Arabia and Singapore. Imports from China and Saudi Arabia – which are subject to 7.5% import duty – account for around 37% of India’s total VAM import volume. Remaining 63% of the volume is imported from Singapore.
However, adhesive manufacturers are finding the demand conditions very challenging and some of them are adjusting their marketing strategy accordingly. For example, Pidilite is expanding its product portfolio and expanding its direct distribution reach to small towns. On the other hand, Astral will be making available all the products of SEAL IT in Indian market which will help it to grow its revenue.
However, manufacturers in organised sector are finding migration of market share from unorganised to organised sector hard to come by. Still, they are confident of getting major chunk of the market share of unorganised sector in the coming days.