JAPAN DISASTER: Crisis sparks panic buying of spot capro in Taiwan

16 March 2011 12:22  [Source: ICIS news]

SINGAPORE (ICIS)--The disaster in Japan has sparked panic buying of spot caprolactam (capro) by downstream nylon makers in Taiwan due to fears of an acute feedstock shortage of April Japan-origin contract volumes, sources said on Wednesday.

More than 10,000 tonnes of spot cargoes for April/May loading were heard snapped up in the past three days at $3,570-3,600/tonne CFR (cost and freight) Taiwan on an at-sight basis, sources said.

This would normally equate to around one-month’s worth of Taiwan’s caprolactam intake from Japan.

"The spot cargoes were mostly sourced from various traders and straight from producers from eastern Europe, Belarus, Russia or Ukraine," said one industry source, which added that several such deep-sea cargoes were re-routed from their original destination, China.

It was also heard that some 2,000-3,000 tonnes of bonded warehouse cargoes in China had been shipped to Taiwan.

As of Wednesday, three key caprolactam plants in Japan were preparing for production cuts, on top of an ongoing scheduled turnaround, potentially taking out 50% of Japan’s total production capacity of caprolactam in the short term, according to ICIS estimates.

Japan has four caprolactam producers - Ube Industries, Sumitomo Chemical, Toray Industries Inc and Mitsubishi Chemical Corp (MCC) - with a combined capacity of 525,000 tonnes/year.

Nylon producers in Taiwan are highly reliant on contractual caprolactam volumes from Japan, taking around 140,000-150,000 tonnes/year, and face a much higher risk of suffering feedstock shortages from April onwards compared with their Chinese counterparts.

Chinese customs data showed that China only imported around 50,000 tonnes annually from Japan.

There has been no major impact on the Chinese market yet, although speculative trading has been evident since Monday.

Although buyers and sellers confirmed that their March caprolactam contract volumes from Japan were unaffected, it remained to be seen how April caprolactam contracts would be affected, and this had added to worries about power-rationing measures, delivery issues and feedstock cyclohexane (CX) shortage issues in Japan.

"I [have] got a really bad feeling about April contracts [of Japanese origin]," said one major buyer.

"I have no idea how long they (crackers and caprolactam plants) would be out of service," he added.

Some small-scale nylon makers in Taiwan were less apprehensive, as they typically take around only 500-1,000 tonnes of contract caprolactam from Japan, which would easily be substituted by one or two parcels of spot cargoes.

However, such buyers preferred premium-quality caprolactam, usually sourced from other overseas producers such as DSM, Domo and BASF.

One smaller-scale nylon buyer based in Taiwan said: "I am willing to pay more for higher-quality caprolactam, but I am sure such sellers would be gracious enough not to jack up prices unreasonably in light of recent events.’’

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By: Junie Lin

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