20 December 2011 23:59 [Source: ICIS news]
LONDON (ICIS)--European nylon 6,6 December contracts have fallen by €0.05/kg ($0.06/kg) from November, because of weak demand, buyers and sellers confirmed on Tuesday.
Nylon 6,6 (or polyamide 6,6) demand is low because of poor macroeconomic conditions and end-of-year destocking.
Demand for the majority of nylon 6,6’s downstream applications – such as automotives – is heavily linked to GDP.
Deteriorating macroeconomic conditions have lowered consumer purchasing power, stalling demand.
Buyers and sellers are also reducing inventories to increase cash reserves to mitigate the risk of a double-dip recession.
Coupled with this, traditional year-end destocking is taking place, to reduce working capital on balance sheets.
“The business is of course not great because we’re approaching Christmas,” said a nylon 6,6 producer.
Inventories approaching 2012 are below traditional levels, although exact figures could not be given.
Empty pipelines have led some sources to caution that any pick-up in demand or production hiccups could rapidly tighten the market and lead to a spike in prices. Some increase in consumption is forecast for January because of restocking, although firm expectations could not be given because of volatile trading conditions.
Nevertheless, the majority of sources are expecting weak demand in January because of end-user outages at the beginning of the month and bearish financial sentiment.
“There’s no visibility for January. Demand is poor everywhere in the world,” said a nylon 6,6 buyer.
Coupled with this the early Lunar New Year, due to take place at the end of January, is expected to limit export demand. Through much of 2011 demand was driven by finished automotive exports to Asia.
“The utilisation is not high and there’ll be no rebound in January. We’ve heard order books [for January] are OK, but demand is not so high to see a rebound [in prices],” said a nylon 6,6 compounder.
End-user holiday outages are expected to last until 6 January 2012 – around one week longer than is traditional – because of the weak demand.
Weak demand has caused nylon prices to fall sharply across the fourth quarter, with virgin polymer nylon 6,6 prices dropping by €0.45/kg since the beginning of October.
Nylon 6,6 December virgin polymer contracts fell by €0.05/kg to settle at €2.55–2.65/kg FD (free delivered) NWE (northwest Europe), because of low demand.
($1 = €0.77)
Additional reporting by Sian Jones Souabni
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