Polymers: Tight capro feedstock prompts nylon 6 price hike

18 October 2010 00:00  [Source: ICB]

Popularity in Asia, coupled with tight caprolactam supply, prompts price hikes

Price hikes for nylon 6 (polyamide 6) are in the works as demand in end-use markets remains strong and feedstock material is tight.

Germany's BASF anounced a 5 cent/lb ($110/tonne, €78/tonne) price increase for North America, effective October 18, for polyamide 6 polymer and copolymers. The increase covers polyamide 6 polymer for spinning, extrusion and compounding.

In September, US nylon producer Honeywell plans to increase its nylon 6 contract prices by 5 cents/lb, also effective October 18. Honeywell cited rising raw material costs as the impetus for the price increase.

Honeywell said its increase would cover all fiber-grade and neat-nylon polymer for spinning and compounding applications, and all extrusion-grade resins for packaging applications.

Some market sources said they had not expected the nylon 6 increases, with one producer saying it anticipated prices to hold steady on nylon 6 supply constraints. This producer had not expected price gains to come before the end of this year, because of fourth-quarter (Q4) demand weakness.

Similarly, September European nylon 6 contracts rose by €0.05 ($0.07)/kg at the bottom end of the range, buyers and sellers reported. The increase was because of tight supply and strong demand, although the majority of contracts were said to have rolled over.

September virgin polymer nylon 6 contracts settled at €2.05-2.10/kg free delivered (FD) Northwest Europe (NWE), as assessed by ICIS. Some players reported seeing prices as low as €2.03/kg FD NWE, although the €2.05/kg FD NWE was considered a fair representation, they said.

Nylon 6 30% glass-filled (prime) grade was €2.49-2.70/kg FD NWE injection (INJ) molded, while unfilled (prime) grade was €2.24-2.30/kg FD NWE INJ molded and unfilled (industrial) grade was €1.69-2.10/kg FD NWE INJ molded, as assessed by ICIS.

Nylon 6 has been in tight supply, particularly in Europe as a result of high demand and difficulties in sourcing the caprolactam (capro) feedstock, European producers said.

Nylon 6 was very tight because of a lack of capro, one producer confirmed.

In Europe, a capro producer said there was a huge amount of polyamide 6 demand in Europe and in Asia. This producer intends to serve the needs of both markets in 2011.

One distributor of both capro and nylon 6 said demand for nylon 6 was up by 12% in 2010, and that was expected to grow by 6-7% in 2011. The downstream engineering plastics industry has been a dominant market with strong consumption. Engineering plastics are a group of plastics that exhibit superior mechanical and thermal properties in a wide range of conditions over and above those commodity plastics that are more commonly used. Engineering plastics are being driven by strong automotive demand in Asia and the US. There is also latent automotive demand in Europe, resulting from the economic downturn in 2008 and 2009, when car purchases where put on hold.

In Asia, luxury car purchases have driven automotive demand. There has been very strong growth in China and throughout Asia, with the comeback of automotive production and industrial exports, according to Anglo-Dutch energy and chemical major Shell.

Shell reported that car production had shown a strong rebound in countries such as China, India and Thailand. China surpassed the US as the world's largest automaker and auto market in 2009, according to industry statistics. China produced 13.79m units, and had sales of 13.64m units last year.

Growth to 2014 would put Asian automotive production at 200m cars produced by that year, a European capro producer said.

In addition to a strong automotive sector in Asia, the textiles market in Asia, especially China, has been strong. The strength of textiles in Asia is because of domestic demand growing at a robust pace. Chinese consumers are showing preference for nylon rather than polyester underclothes because nylon is softer and offers better comfort, industry sources said.

Overall, demand for nylon is recovering from the global economic downturn, but there is still a cost differential between it and competing polymers that continues to suppress growth to a certain extent, especially for the nylon fiber market, which has been shifting steadily toward Asia, according to industry sources.

China has been taking up the slack in nylon fiber consumption, where in other regional markets there had been slower growth. China has become the largest textile-producing, consuming and exporting country in the world. It produced 1.4m tonnes of nylon filament yarn in 2009, according to data from the Taiwan Man-Made Fiber Industries Association.

Industry sources estimated that nylon demand in China will grow in line with the country's GDP, slightly more than 10%/year over the next two to three years.

Production of nylon 6 fiber in China is projected to grow at approximately 8%/year over the next decade, according to UK-based petrochemicals consultancy Tecnon OrbiChem.

In comparison, the current demand for textiles in Europe is running at its seasonal high. Bulk continuous filament (BCF), which is used in carpeting, is said to be performing well, along with European yarn production.

The outlook for capro and its downstream derivatives in Europe is expected to remain strong, predominantly for export to Asia, according to market players at the 44th annual European Petrochemical Association (EPCA) meeting in Budapest, Hungary, in early October.

Capro, a major feedstock for the production of nylon 6, is expected to remain very tight through to the whole of 2011, a European capro and nylon 6 producer said. October capro contract discussions are expected to begin in earnest, following the EPCA conference.

But on the sidelines at the industry event, there were early indications that suggested producers were not prepared to give away the €36/tonne drop in the value of the October benzene contract. Benzene is a feedstock for capro production. Strong demand in Europe and from Asia were the reasons given for the producers' position. Some producers continued to schedule capro for export to Asia because of the shortage of feedstock for nylon production in China, the key market for nylon 6.

Sources on both sides of the market confirmed that European capro is still fundamentally tight. Meanwhile, European buyers said they could secure sufficient volumes to meet their ­requirements.

However, at least one buyer thought sellers were taking a too-short term view by relying on export opportunities to China.

Yet buyers in general accepted that demand for all products in the polyamide chain remained at a high level with no sign of a slowdown in Q4 2010. Some destocking is foreseen in the time ahead, but this is not expected to happen until late December.

Further upstream in feedstock news, benzene settled at €667/tonne in October, representing a reduction of €36/tonne from September, as assessed by ICIS.

One producer at EPCA, however, said he believed that the dollar value of benzene would rise as high as $1,000/tonne in the month of October, based on strong demand in the styrenics market.

Additional reporting by Julia Meehan in Budapest, Larry Terry in Houston, Mark Victory and Peter Gerrard in London, Anu Agarwal in Singapore and Junie Lin in Singapore

By: Feliza Mirasol
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