VAM price hike just one of many by Dow Chemical

By Tom Stundza -- Purchasing, 6/25/2008 9:48:00 AM

Industry leader Dow Chemical has joined other suppliers who plan to be selling vinyl acetate monomer (VAM) at 93¢/lb in July after two price hikes amounting to 6¢ when fully implemented in response to the current climate of increased costs of energy and raw materials. The chemical is used in the manufacture of emulsion polymers, resins and other intermediates for paints, adhesives, coatings, textiles, wire and cable, laminated safety glass, packaging, automotive parts and acrylic fibers.

VAM spot-sales prices have been steady for some months because of weak domestic sales, but a recent report on the ICISpricing.com subscription web site noted: “Buyers say third quarter price hike proposals issued by producers will be hard to ignore, considering that they are part of broad rate hikes sought for dozens of petrochemicals due to the runup in energy prices.”

Dow Chemical, in particular, now has announced two rounds of price hikes—20% announced in June and 25% in July—which the Midland, Mich., firm says has been caused “by the continuing relentless rise in the cost of energy and hydrocarbon feedstocks.” Dow also plans to implement a freight surcharge of $300 per shipment by truck and $600 per shipment by rail, effective August 1. The surcharge applies to North America customers buying chemicals, hydrocarbons and plastics where Dow absorbs the freight.

Dow's price hikes tend to lead a parade of other chemicals makers boosting prices to pass on higher raw-material costs to their customers. In a statement, Dow CEO Andrew N. Liveris says the price increases are “extremely unwelcome but entirely unavoidable” as the global cost of oil, natural gas and hydrocarbon derivatives surge ever higher. He says that Dow’s six-month feedstock and energy costs are up more than 40% from a year earlier. Dow uses oil-based products and natural gas as raw materials and is a heavy user of energy to power manufacturing plants.