FocusAsian capro spot prices to rise despite weak downstreams

26 August 2011 19:27  [Source: ICIS news]

By Junie Lin

HANGZHOU (ICIS)--Asian caprolactam (capro) spot prices are expected to edge higher as a result of tight supply, despite poor conditions in the downstream spinning yarn segments, said producers, buyers and traders on Friday.

Capro spot discussion levels were hovering at $3,570-3,580/tonne (€2,499-2,506/tonne) CFR (cost and freight) China on Friday, with offers among traders as high as $3,600-3,620/tonne CFR China for early October loading deep-sea origin cargoes.

A sole bid for a Ukraine-origin cargo was also heard $3,585/tonne CFR China from a end-user for early October loading, while another spot Russia-origin cargo was heard to have changed hands at $3,570/tonne CFR China for September shipment this week.

At least one Japan-origin spot cargo was reported to have sold early in the week at $3,600/tonne CFR China for September to a nylon chip end-user, the highest sold deals heard in the spot market so far by Friday’s close.

Spot prices were $3,540-3,580/tonne on a CFR China basis on 24 August, ICIS data showed, $20/tonne higher on the low end of the range week on week.

Current spot discussion levels prices are just $100/tonne short of what China capro major, Sinopec forecasted in March, market players said.

Sinopec previously said that Asian capro spot prices were unlikely to go beyond $3,700/tonne in 2011, as downstream nylon industries were unable to absorb the costs.

However, downstream spinning yarn makers have grappled with meagre margins since April as a result of high feedstock costs.

Many yarn makers also said their customers are increasingly preferring cheaper polyester Full Drawn Yarn (FDY) 50/72 denier yarn to FDY70/24 nylon yarn. 

A downstream spinning yarn maker lamented, “Its’ already end August, and there is no signs of recovery before the peak season.”

September and October is the traditional peak manufacturing period for the entire nylon industry.

“The ideal market situation would be for caprolactam and nylon chips prices to hover at current levels for a month or two, so that nylon spinning yarn makers can catch up [with the rising prices]”, said a major northeast Asian nylon chips maker.

But this is not possible, said most downstream nylon chips makers and spinning yarn makers.

Capro supply is simply too tight, and this explains the uptrend looking forward, at least in the short term, added most downstream nylon chips makers and spinning yarn makers.

Supply in the near term would be especially tight in the fourth quarter, where Asia-capro majors such as South Korea’s Capro Corp, will be entering its turnaround in early October.

Sumitomo Chemical will also take down its two capro lines, which are capable of producing 180,000 tonnes/year, for scheduled maintenance at the end of October for more than one month.

Taiwan's China Petrochemical Development Corp (CPDC) is also considering to shutting its newly debottlenecked 200,000 tonne/year capro unit at Xiaogang in Kaohsiung for a 45-day turnaround in December this year.

There will be also be turnarounds by Japan’s Toray, and Sinopec’s Baling, said a major trader.

“There is also speculative activity by traders, and we will see very high market volatility in the near term”, said a Asia-based producer.

There is a string of nylon chips expansions that will further squeeze the spot market, said producers and buyers.

China is expected to see some 390,000 tonnes/year of new downstream nylon chips capacity in the next six months, a downstream yarn maker estimated.

For more on caprolactam, visit ICIS chemical intelligence
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By: Junie Lin

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