Rhodia's Europe nylon 6,6 FM extended on feedstock shortages

By Mark Victory

LONDON (ICIS news)--Rhodia Polyamide’s force majeure (FM) on European nylon 6,6 and intermediaries will last longer than expected due to supply constraints in the upstream butadiene (BD) market, a company source said on Tuesday.

The FM was originally declared on 12 October 2009 because low water levels on the River Rhine caused logistics constraints which prevented Rhodia from sourcing BD.

Water levels on the Rhine had now returned to normal and Rhodia was in the process of exiting the FM on nylon 6,6, the company source said.

BD production constraints and FMs at SABIC on BD, however, have caused continued difficulties in sourcing nylon 6,6 feedstocks, leading to Rhodia’s continued need to remain under FM, the source added.

BD is a feedstock for adiponitrile (ADN), which in turn is the feedstock for nylon 6,6.

It was unclear how long problems in the upstream BD market would continue, the source added, but nylon 6,6 production would take time to return to normal even after BD availability improved.

“The chain is very long. Even if BD production goes back to normal tomorrow, we will not be able to resume [production] straight away,” the source said.

The length of time taken for Rhodia to exit FM on nylon 6,6 would depend on demand levels in the European market, the source added.

“If demand is low, it could be quicker [to return to normal production]” the source said.

The announcement comes amid a period of very tight supply in the European nylon 6,6 market, in part caused by the FM at Rhodia, buyers and sellers said.

“Material is almost unavailable, even for contract volumes. Rhodia is still out. The [nylon 6,6] market is tighter than I’ve ever seen,” one buyer said.

Players estimated that consolidation within the nylon 6,6 and ADN markets in 2009 had removed approximately 250,000 tonnes/year of nylon 6,6 capacity and 300,000 tonnes/year of ADN capacity.

Consolidation had been driven by low consumption rates resulting from the effects of the global economic downturn on the major end-use automotive industry, sources confirmed.

Since the fourth quarter of 2009, however, buying interest from the automotive sector has improved, driven initially by government incentive schemes and then by an improving macroeconomic climate, according to buyers and sellers of nylon 6,6 and ADN.

Buyers and sellers reported high demand throughout the first quarter, and consumption was expected to remain strong because the second quarter is traditionally the peak season for automotive buying interest.

Supply constraints were expected to remain a long-term problem in the nylon 6,6 market as a result.

Tight supply of nylon 6,6 has already resulted in contract price increases of €0.15/kg ($0.21/kg) between the fourth quarter of 2009 and the first quarter of 2010.

Prices were expected to further increase in second quarter contracts by up to €0.20/kg, buyers and sellers confirmed. First quarter nylon 6,6 virgin polymer contracts settled at €2.25-2.45/kg FD (free delivered) NWE (northwest Europe), according to global chemical intelligence service ICIS pricing.

($1 = €0.73)

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