FocusAsia capro prices surge, set to remain firm on buying

20 January 2011 05:21  [Source: ICIS news]

By Junie Lin

The textile industry is a major downstream market for caprolactam.SINGAPORE (ICIS)--Surging Asian caprolactam prices are likely to remain firm in the months ahead due to tight supply and as downstream nylon makers scramble to secure the material to avert possible shortages, industry sources said on Thursday.

Caprolactam (capro) spot prices jumped by $70-100/tonne (€52-74/tonne) week-on-week to $3,120-3,200/tonne CFR (cost & freight) Taiwan and $3,140-$3,200/tonne CFR China on 19 January, spurred by keen buying interest and tight supply, ICIS data showed.

This is the highest price for capro since records were maintained from early 2008. (Please see graph below)

Discussions in the Chinese spot market were speculative in nature and inventory level among buyers and end-users was low, sellers and traders said.

As a result, Thursday’s offers of deep-sea cargoes edged up to $3,230/tonne CFR China for shipment in late February, market sources said.

The tight supply also caused January contract prices to be concluded at $2,950-2,960/tonne CFR NE (northeast) Asia, up by $150-160/tonne compared with December, ICIS data showed.

February contracts were also largely expected by buyers to stay very close to the current spot prices and offers were expected to emerge in the next two weeks, sellers and buyers said.

“Given the steep spot prices, it would be no surprise at all if February capro contracts were offered at $3,250/tonne CFR NE Asia,” one major Taiwan-based nylon maker said.

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

In the downstream nylon industry, at least two major nylon producers in Taiwan were informed that their capro contract volumes would be greatly reduced in the coming months because of the upcoming turnarounds at China Petrochemical Development Corp (CPDC) and at a Europe-based plant.

Despite the coming Lunar New Year holidays in early February, one major nylon maker in Taiwan said he had no choice but to continue to seek the higher priced spot caprolactam cargoes next week, as he faced a possible 30% reduction in his monthly contract volume from March to May.

Trading activities are known to slow down in the run-up to the holiday season.

“I have no choice. I have to replenish my depleted inventories and stock up [on] spot cargoes to cover my lost contract volumes. If not, my operating rates would be severely impacted,” he said.

The same producer and another nylon maker in Taiwan may reduce their operating rates by at least 10% in the coming weeks, in light of high production costs and reduced feedstock supply due to upcoming planned shutdowns.

Another Taiwanese producer was also planning to shut down one of its two nylon chips lines to combat the high feedstock costs, sources close to the company said.

Taiwan’s CPDC plans to shut its Miaoli-based 40,000 tonne/year nylon chip facility in early April for a month-long turnaround, a company source said.

The shutdown would be in tandem with a turnaround of its upstream 100,000 tonne/year caprolactam plant, the source added.

As spot prices of the raw material capro continue to skyrocket, most suppliers were compelled to increase their minimum selling ideas in order to sustain their high production cost.

However, sales started to decline by Tuesday in the run-up to the Lunar New Year holiday season.

The prices of Asian nylon semi-dull chips jumped by $150-170/tonne week-on-week to fresh record high levels of $3,400-3,470/tonne CFR China to reflect higher selling ideas and sporadic deals, ICIS assessed.

However, buyers of nylon chips were not interested in such high prices as they had sufficient inventory to last through the holidays, sources said.

Buyers were only purchasing small volumes to cover immediate requirements, they added.

China will be closed on 2-8 February for the Lunar New Year celebrations.

($1 = €0.74)

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By: Junie Lin

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