Asia capro nears record high on strong demand, tight supply

14 October 2010 08:38  [Source: ICIS news]

By Junie Lin

SINGAPORE (ICIS)--Asian caprolactam (capro) spot prices have surged after the Chinese holidays on the back of high demand and tight supply and are likely to see more gains this year, market players said on Thursday.

Capro values rose by $70-100/tonne (€50-72/tonne) week on week to $2,670-$2,730/tonne CFR (cost & freight) China on 13 October, nearing record-high levels last seen on 12 May 2010, ICIS data showed.

Most of the October contracts were settled at around $2,590–2,600/tonne CFR northeast (NE) Asia, up by $30–50/tonne from September’s settlement prices, said buyers and sellers.

“The high prices took everyone by surprise,” said a major capro supplier.

Capro is an intermediate used primarily in the production of nylon 6 fibres, plastics and other polymeric materials, while Nylon 6 is widely used in the manufacture of hosiery, knitted garments, threads, ropes, filaments, nets and tyre cords.

The surge in capro prices was because of a combination of factors including several ongoing and upcoming plant turnarounds by major producers such as Capro Corp, Sumitomo Chemical Co and China Petrochemical Development Corp (CPDC), buyers and sellers said.

Capro demand was also supported by the peak manufacturing season in the Chinese downstream nylon sector in November, they added.

Asian nylon chips prices increased by $50-70/tonne week on week to $2,850-2,870/tonne CFR China on 12 October, based on ICIS data.

Meanwhile, sentiment in the capro market was also underpinned by rising cotton prices as well as high purified terephthalic acid (PTA) numbers, which were at a 25-month peak of $1,020-1,040/tonne CFR China Main Port (CMP), said market players.

In addition, the lifting of government restrictions on industrial energy use in China’s Zhejiang province - the country’s capital for textile production - further boosted the production of nylon yarn, which in turn, has also bolstered capro prices, they added.

Most capro players said robust demand and continuing tight supply made them optimistic optimism about the outlook for the fourth quarter of the year.

They also said the Chinese government’s preliminary decision on potential anti-dumping duties (ADD) for cargoes originating from the EU and the US would have little impact on the Asian capro market.

Tyre cord producers from China could claim duty refunds, if they exported their finished products to Indonesia, Vietnam and India, said players, adding that the automotive industry in those countries was booming.

The ADD investigation was filed in April 2010 and a preliminary decision was expected to be announced in late October.

Looking ahead, market players said tight supply situation in China would last for the next two years, making it difficult for the country stop import cargoes, especially because Chinese domestic prices were not showing any signs of easing.

($1 = €0.72)

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By: Junie Lin



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