07 December 2011 23:59 [Source: ICIS news]
LONDON (ICIS)--European November caprolactam contracts have settled down by €100/tonne, to a net level of €2,050-2,140/tonne ($2,746–2,866/tonne) FD (free delivered) NWE (northwest Europe), because of weak demand and falling feedstock costs, buyers and sellers said on Wednesday.
Caprolactam producers had been trying to limit price cuts broadly in line with the upstream November benzene contract price drop of €41/tonne, but low consumption levels and weak nylon margins forced reductions in excess of the benzene fall.
October nylon 6 (or polyamide 6) contract prices were down by €150-250/tonne from September, while October caprolactam contracts fell by €80-90/tonne in the same period.
November virgin polymer nylon 6 contracts dropped a further €50-100/tonne. Buyers are expecting further nylon 6 price reductions in December.
Demand is low because weakening macroeconomic conditions have reduced consumer purchasing power.
Coupled with this, buyers are destocking in order to reduce working capital on year-end balance sheets.
Inventory reduction has been stronger than in most years, according to sources, although exact levels could not be estimated.
November 2011 demand was around 20% below the same period in 2010, according to market estimates.
December contract negotiations have begun, but are at an early stage.
Buyers are targeting reductions in feedstock prices in order to restore margins on nylon 6, although exact targets will not be made until December nylon contracts are settled.
Producers are targeting a rollover to a slight price increase, because of unchanged fundamentals and an €11/tonne rise in the December benzene contract price.
The European December benzene contract has been agreed at €671/tonne.
The benzene settlement was made at a US dollar concept of $895/tonne FOB (free on board) NWE and converted to the euro price at the agreed exchange rate of €1 to $1.334.
While the number is a small increase in euro terms, the initial dollar figure represents a $40/tonne drop from November. In November, the agreed exchange rate was €1 to $1.416.
In production news, Netherlands-based life sciences and specialty materials producer DSM will halt production at its 250,000 tonne/year caprolactam plant at Geleen, in the ?xml:namespace>
The outage is expected to last for around five weeks, a company source said.
Caprolactam is the precursor to nylon 6, a widely used synthetic polymer.
For more on caprolactam visit ICIS chemical intelligence
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