10-20% of Europe nylon 6,6 orders cancelled due to tight supply

04 May 2010 16:59  [Source: ICIS news]

LONDON (ICIS news)--Some 10-20% of European nylon 6,6 orders are being cancelled due to tight supply, buyers and sellers said on Tuesday.

“It’s a really big problem … contractual volumes are not being fulfilled by all of the producers. We’re 10-20% below contracted volumes,” one producer said.

Other producers confirmed they could not fulfil order volumes, but denied cancelling contracted volumes.

“In a contract, there is always a minimum contractual commitment. We couldn’t be below this,” a major producer said.

Buyers, however, almost universally reported cancellations of contracted volumes.

“The ‘sold-out’ signs are up. Deliveries are below contract volumes,” one buyer confirmed.

Some buyers were turning to overseas suppliers in the US and Asia in order to secure volumes.

“So far we [are getting what we need], but we had to secure containers from overseas,” one such buyer reported.

Supply of nylon 6,6 was globally tight, with one source reporting US prices of up to $4.00/kg (€3.04/kg) FD (free delivered) NWE (northwest Europe) as a result.

Buyers were becoming concerned European supply shortages could force downstream producers to halt production.

“There’s a danger of downstream closures because there’s not enough material,” a buyer said.

Reports of unfulfilled orders came amid confirmation of extended lead times of up to 18 weeks for finished engineering plastics goods made from nylon 6,6, players said. Lead times now averaged around 12 weeks, up from 2-3 weeks in October 2009, when a shortage of nylon 6,6 first manifested.

The tight supply of nylon 6,6 in Europe, which began in the fourth quarter 2009, was caused by consolidation in 2009, difficulties in obtaining feedstocks adiponitrile (ADN) and adipic acid, and the continued force majeure on nylon 6,6 and intermediaries at Rhodia Polyamide, sources said.

“Suppliers are selling [nylon 6,6] like diamonds. We’re not able to supply customers,” a nylon distributor said.

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

The consolidation was driven by low consumption rates that resulted from the global economic downturn’s effects on the automotive sector, which is the major end-user of nylon 6,6 and ADN, sources added.

The force majeure at Rhodia was originally declared on 12 October 2009, initially because low water levels at the River Rhine caused logistics constraints.

Feedstock shortages continued to cause ongoing issues and the force majeure remained in place ahead of a maintenance turnaround from 21 May to 28 June 2010, a company source said.

Nylon 6,6 supply was expected to remain tight throughout the second quarter, and sources said any easing would depend on when raw materials became more available.

As a result of the tight supply, European nylon 6,6 virgin polymer second quarter contract prices settled €0.20-0.25/kg ($0.26-0.33/kg) higher compared with the first quarter at €2.50-2.65/kg, according to global chemical intelligence service ICIS pricing.

This brought the price of nylon 6,6 to its highest point since ICIS records began in November 1999. The previous record high was €2.48/kg, reported between 1 July and 23 September 2008.

($1 = €0.76)

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By: Mark Victory
+44 208 652 3214

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