Europe Dec caprolactam up €27/tonne on higher benzene, good demand

05 January 2011 23:59  [Source: ICIS news]

LONDON (ICIS)--The European December caprolactam contract price has risen by an average of €27/tonne ($36/tonne) reflecting the full increase in the cost of benzene feedstock and because of tight supply and healthy demand in Europe and for export to Asia, producers and consumers said on Wednesday.

The December caprolactam pre-discounted contract price settled at €2,257-2,313/tonne FD (free delivered) NWE (northwest Europe).

"December contracts were finalised a little later than usual given the many absences due to the Christmas break and, for us, €27/tonne reflects the low end of hikes implemented," one producer said.

"The bulk of our business was settled reflecting hikes at over €30/tonne. Inventories were at an historical low; one or two accounts met increases within a €35-40/tonne range," it added.

Other producer sources available to comment said that increases of €27/tonne were a fair representation of December settlements.

A number of buyers also conceded that hikes of €27/tonne were perhaps a fair reflection of December freely negotiated contract settlements but one or two said increases were within a €20-27/tonne range. Another said it had settled some business at the full benzene increase but was waiting for confirmation of a lower increment from one or two other suppliers.

A large buyer conceded that its hikes had been at up to €30/tonne. "We have not been able to pass the December increases on to the downstream markets so far," the buyer said.

Attention in the European caprolactam market had turned to the recent January benzene contract which settled, reflecting increases of €149/tonne, at €879/tonne FOB (free on board) NWE (northwest Europe).

The benzene contract price is largely based on developments on the spot market, but global supply and demand dynamics are also pivotal in the negotiation process.

One caprolactam producer said: "It is early days in the negotiation process but hikes slightly exceeding €150/tonne were expected - as a minimum - to cover the raw material price development".

A consumer source countered that a full benzene cost increase would be too much.  “We need to look at downstream markets and see how much can be passed on, €50/tonne is far too high," it said.

According to a number of market sources, market dynamics look set to support increases but clearer ideas on the exact amount are not expected until next week when more market participants return to their desks.

The majority of buyers and sellers indicated that demand continued to exceed supply. One consumer added: "Caprolactam demand remains strong and it is difficult to get enough product".

($1 = €0.75)

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By: Sian Jones
+44 20 8652 3214

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