Lengthy lead times for Europe nylon 6,6 engineering plastics

04 May 2010 17:28  [Source: ICIS news]

By Mark Victory

LONDON (ICIS news)--Lead times for European nylon 6,6-derived engineering plastics have increased to as much as 18 weeks, from 2-3 weeks in October 2009, due to the tight supply of nylon 6,6, sources said on Tuesday.

“We are now at 18 weeks [lead time] for engineering plastics. We were at 12, but this was insufficient,” one producer of nylon 6,6 finished goods said.

Lead times - the time it takes from a product being ordered to delivery - for engineering plastics made from nylon 6,6 were now regularly around 12 weeks, buyers and sellers said.

The increase was due to short supply in the nylon market, along with higher demand.

“Engineering plastic buyers have been 20% above their own forecasts so far in 2010. These additional requirements are not easy to fulfil,” one nylon 6,6 producer said.

The heavy downstream consumption was attributed to restocking and end-users increasing order volumes in order to ensure supply, buyers said.

This was leading to some worries over true demand levels, and there were concerns of a drop in consumption in the second half, particular as government stimulus packages were now at an end, sources said.

There was continued uncertainty from the downstream automotive industry, which is the main consumer of engineering plastics, they added.

“End-users are filling up the pipeline before the summer-break. We are concerned. The end-user is not confirming anything in the second half [of 2010],” another producer of nylon 6,6 finished goods said.

Reports of longer lead times came amid confirmation from buyers and sellers that 10-20% of European nylon 6,6 orders were being cancelled due to tight supply.

Buyers were becoming worried that 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.

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 (FM) 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 that market consolidation had removed approximately 250,000 tonnes/year of nylon 6,6 capacity and 300,000 tonnes/year of ADN capacity.

Consolidation was driven by low consumption rates resulting from the global economic downturn’s effects on the automotive sector, which is the major end-use market of nylon 6,6 and ADN, sources added.

Nylon 6,6 was expected to remain in tight supply throughout the second quarter, and sources said that 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 at an increase of €0.20-0.25/kg ($0.26-0.33/kg) from the first quarter, to €2.50-2.65/kg, according to global chemical intelligence service ICIS pricing.

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

($1 = €0.76)

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By: Mark Victory
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