Chinese VAM Capacity Surges from 3 Million to 3.8 Million Tons in Four Years
Profitability of Ethylene Glycol and Other Products Plummets, Leading to Widespread Production Cuts
China Launches All-Out Offensive with Low-Priced Coal-Based Chemical Products
According to global market research firm ICIS and others on July 23, China's annual VAM production capacity surged from about 3 million tons in 2020 to over 3.8 million tons in 2024. Major companies such as Shanghai Huagong, Shanxi Jinneng Chemical, and Suizhou JTC have operated large-scale facilities over the past two to three years, while new investments are underway in some regions. Guangxi Huayi Energy is reportedly constructing a new VAM production facility with an annual capacity of 300,000 tons, aiming to start operations in 2026.
Industry experts diagnose that this aggressive expansion is not only causing concerns about oversupply but is also fundamentally changing the market structure itself. The increased volume of Chinese VAM is exerting downward pressure on prices in the Northeast Asian market. The average VAM price in this region, which was around $1,000 per ton in 2023, fell to about $830 last year. Chinese VAM is sometimes traded at even lower prices, around $700 per ton.
The greatest strength of Chinese products is their cost competitiveness. Local companies utilize a 'coal-to-chemical' system, securing raw materials by breaking down coal themselves, whereas Korea imports most key raw materials such as methanol from the Middle East or China. This structural difference puts Korea at a disadvantage in price competition. In this import-dependent structure, competing with low-priced Chinese products is virtually impossible. Since technological prowess alone cannot bridge the price gap, domestic companies are said to be reaching structural limitations.
Moreover, the slowdown in investment in major industries that use VAM, such as construction, solar power, and electric cables, is compounding the problem, forcing domestic companies to sell products at prices below cost, resulting in a negative margin structure.
The postponement of VAM expansion does not simply indicate a slump in this particular product's market. Other intermediate products are facing similar situations. For example, the price of ethylene glycol (EG), used as a raw material for polyester, hovered around $700 per ton in Northeast Asia until 2022 but has recently dropped to the mid-$400 range. This is the result of China's capacity expansion combined with stagnant demand. Lotte Chemical is pushing to suspend the EG and methyl methacrylate (MMA) production lines at its Yeosu Plant 2, while some mid-sized petrochemical companies in the Daesan and Ulsan regions are considering production cuts or postponing expansions for both commodity and specialty products. Even for precision products, if global demand does not support them and the price gap with Chinese products cannot be overcome, their very survival is at risk.
An official from the Korea Chemical Industry Association said, "As seen in the case of methanol, the raw material for VAM, which is entirely dependent on imports, Korea is already at a disadvantage from the starting line in terms of cost structure," adding, "Rather than confronting China directly, it is better to find ways to avoid head-on competition."
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