FocusAsia capro producers mull output cuts on squeezed margins

07 December 2011 06:35  [Source: ICIS news]

By Junie Lin

SINGAPORE (ICIS)--Asian caprolactam (capro) producers are resorting to cutting production on thinning margins amid falling prices, and as downstream nylon plants run at reduced operating rates because of weak demand, industry sources said on Wednesday.

Most nylon chips plants in northeast Asia are running facilities at around 60-70% of capacity, with a Taiwanese producer operating at a very low rate of 30%.

Xinhui Meida, China’s largest nylon chip producer, will cut the operating rate at its 200,000 tonne/year facilities to 40%  for 20 days from mid-December, said a company source.

Caprolactam inventories among producers are currently high since downstream nylon chips end-users have reduced contractual volume requirements and are instead taking cargoes on a need-to basis, industry sources said.

Caprolactam mostly goes into the production of nylon, which is widely used in the manufacture of hosiery, knitted garments, threads, ropes, filaments, nets and tyre cords.

With capro prices continuing to fall, producers’ margins are being squeezed. Margins have come off from a high of $1,250/tonne in September to merely $200/tonne currently.

Capro must be priced $1,200/tonne higher than benzene for producers to break even. Based on current prices of feedstock benzene of around $1,000/tonne FOB Korea, the breakeven costs for capro producers are around $2,200/tonne.

Spot prices are being quoted at around $2,450/tonne (€1,838/tonne) CFR China this week, down by 32% since early September. Contract price discussions have also fallen by close to $1,000 tonne or more than 27% from September.

Some producers are hoping to stem capro’s price fall by limiting available supply.

Taiwan's sole capro producer, China Petrochemical Development Corp (CPDC),  has been running its 200,000 tonne/year plant at Xiaogang plant and its 100,000 tonne/year plant at Toufen at around 50-60% of capacity since mid-November, a company source said.

CPDC may also bring forward the turnaround of its newly debottlenecked capro unit at Xiaogang to the end of December from February 2012, the source said.

Meanwhile, another major northeast Asian producer is heard to be running at 80% after restarting its line in early December, sources close to the company said.

The plants’ output may be cut further to 70% should market conditions further deteriorates, they said.

Another regional northeast Asian producer is heard running at lower rates of around 85%, according to market players.

($1 = €0.75)

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By: Junie Lin

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