Home News Softer VAM price gives breather to adhesive manufacturers

Softer VAM price gives breather to adhesive manufacturers

The only silver lining for the adhesive manufacturers who are facing lockdown induced demand disruption is the softer prevailing price of their key input, vinyl acetate monomer (VAM), in the international market. VAM, which was trading at US$840/t in 4Q FY20, has fallen to US$670/t in the spot market. This has helped the adhesive manufacturers like Pidilite Industries to sustain their margins to some extent in a market which has seen almost nil sales during lockdown. However, softer VAM prices may not result in reduced prices of the final products as the adhesive manufacturers are little apprehensive about the sustainability of input prices at the current level.

In the fourth quarter of FY20, there were supply disruptions from China due to logistics constraints and delays in the return of workers from the extended Lunar New Year holidays and coronavirus outbreak containment measures. As a result, February shipments of VAM from China bound for southeast Asia and south Asia could not be fulfilled on time, prompting buyers to procure material from other sources which in turn impacted the prices. Towards the later part of the quarter demand for the material too came under pressure as Coronavirus spread was widening and that turned sentiment bearish. Also, steady-to-soft ethylene feedstock values and the plunge in crude oil values  contributed to the falling prices of the material.

However, adhesive manufacturers are not too certain about the demand prospects for the industry. For example, sources in Pidilite Industries feel that future demand cannot be estimated based on demand in May and June. While April was complete washout subsequent two months have seen revival in demand. Demand is seen mainly in rural areas and towns while major cities, mainly Metro cities, still lag behind the rural India in demand. Also, demand is slower in picking up in Western and Northern markets so far.

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