FocusAsian nylon chip makers expect higher December prices

10 November 2010 05:41  [Source: ICIS news]

By Junie Lin

A textile unit in China. Nylon goes into making of textiles.SINGAPORE (ICIS)--Asian semi-dull nylon 6 chip makers are expecting prices to increase again for December, after reaching a record high this week, because of firmer feedstock prices and healthy demand, market sources said on Wednesday.

Record prices were seen on 9 November following a gain of $80-120/tonne (€58-86/tonne) or 2.8-4.2% week on week to $2,930-3,000/tonne CFR (cost & freight) China, ICIS data showed.

The increase was on the back of firmer caprolactam (capro) feedstock values, sellers and buyers said.

The healthy demand for nylon chips was being supported by the peak manufacturing season in the Chinese downstream nylon sector this month, they added.

The previous peak was from mid-May to mid-June 2010, when prices were at $2,880-2,900/tonne CFR China, before tumbling $250-280/tonne to $2,600-2,650/tonne CFR China in late July due to falling feedstock values. Since then, however, prices have climbed steadily, by a total of 12.7-13.2%.

Most sellers were fully booked for November with the majority of deals in the range of $2,930-2,970/tonne CFR China and at an average of $2,950/tonne CFR China, buyers and sellers confirmed.

In addition, around 10,000 tonnes of Taiwanese material was sold at $3,000/tonne CFR China on Monday, market sources said.

Selling indications this week were in the range of $3,000-3,050/tonne CFR China.

However, buyers were hesitant in committing to December orders early, unless the feedstock caprolactam generated enough momentum to rise above the psychological $3,000/tonne CFR China barrier, sources said.

Most nylon chip producers were still under great cost pressure and preferred to hold on to their December goods in expectation of further price hikes.

"We do not know where our costs will end up, so we will not make any offers now," a major Asian nylon chips supplier said.

Most market participants expect sellers to raise their offer prices again to maintain their margins once the December capro contract price is announced at the end of November.

A spread of about $250-300/tonne is needed between capro and nylon to ensure production margins are maintained, market participants said.

Meanwhile, November capro contracts are in the final stages of negotiations at $2,680-2,720/tonne CFR NE (northeast) Asia, against offers at $2,730-2,750/tonne CFR NE Asia.

Nylon 6, also known as polyamide 6 or polycaprolactam, is widely used in the manufacture of hosiery, knitted garments, threads, ropes, filaments, nets and tyre cords.

The textiles sector was putting an upward pressure on prices of all related chemical chains including polyester and upstream PTA.

Capro is an intermediate primarily used in the production of nylon 6 fibres, plastics and other polymeric materials.

Taiwan-based nylon makers include Formosa Chemicals & Fibre Corporation, Li Peng Enterprise, Zig Sheng Industrial, Hualon Corporation and China Petrochemical Development Corporation.

($1 = €0.72)

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By: Junie Lin

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