FocusStrong demand halts Europe caprolactam price fall

19 May 2010 23:59  [Source: ICIS news]

By Julia Meehan

LONDON (ICIS news)--Strong caprolactam demand for export to Asia and European nylon production has prevented the May contract price falling despite a €49/tonne ($60/tonne) drop in the benzene settlement, market sources said on Wednesday.

“It’s not logical to move the caprolactam price down even with benzene down. Benzene has no relevance anymore; it should just be the supply and demand balance, there is no other reason,” commented a major producer of caprolactam.

Typically, any movement in the direction of the benzene contract would drive the direction of caprolactam pricing, but owing to the strong interest for caprolactam to Asia in the past eight months and strong demand for European polymer, benzene has become less of a driver.

For May contracts, some caprolactam buyers had expected prices to follow the €49/tonne drop in the value of the May benzene contract price, although most were aware that the tight supply situation could possibly prevent them from doing so.

One buyer said that it needed to be realistic about its May contracts: “I need to be realistic, I don’t think the contract will drop €49/tonne, but I will be looking for a €10-15/tonne reduction.

"It is tight, there is no caprolactam and there is no polymer, but we are not living in Asia, we are living in Europe,” the buyer said.

A second larger buyer confirmed that its May contract had rolled over since the European market was “critically tight”.

“It’s critically tight and I don’t get enough. We need to reduce our polymer production because of the shortage…we have to reduce at the weekends so we can get to Monday. This is my big problem,” the polymer producer said.

Other polymer manufacturers also confirmed that they were forced to run their spinning facilities at reduced rates because they could not secure enough caprolactam.

“We are not at full rates because we are linked to everybody. DSM is in a shutdown, LANXESS is shutdown and Spolana will go into a shutdown,” said another polymer producer.

The producer source also confirmed that its contract price for May was agreed at a rollover despite attempts to push for some of the €49/tonne benzene price reduction.

A source at DSM confirmed that it officially started a planned turnaround at its 250,000 tonne/year caprolactam plant in Geleen in the Netherlands on 12 May. “Our lines producing caprolactam in Geleen would not be down simultaneously during the four weeks planned maintenance,” the source said.

Notwithstanding production issues, many sources also attributed the availability issues to strong demand in Asia, which has been felt in the market since October 2009.

Many idled nylon spinning facilities in China resumed production in the fourth quarter of 2009, following the announcement by the Chinese government that it was to impose anti dumping duties (ADDs) on nylon 6 in October 2009.

The ADDs on nylon 6 from Europe and the US resulted in a high level of interest for caprolactam imports because there was insufficient production in China to satisfy local demand. Since then, European producers have been exporting large quantities of flaked material to the region.

Caprolactam prices in Asia have also increased by 30% since October 2009, making Asia a far more attractive outlet for European caprolactam, while in Europe prices have firmed by 20% during the same period. 

The weaker euro also heightened Asia’s attractiveness.

A European producer said: “European buyers were now in direct competition with their Asia buying counterparts who are hungry for material.”

The May caprolactam contract price was agreed at a pre-discounted €2,190-2,246/tonne FD (free delivered) NWE (northwest Europe) NWE, according to data from global chemical market intelligence service ICIS pricing. Discounts of up to 25% are applied to the contract price for larger accounts.

($1 = €0.82)

For more on caprolactam visit ICIS chemical intelligence
To discuss issues facing the chemical industry go to ICIS connect

By: Julia Meehan
+44 20 8652 3214

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