Europe March capro contracts up €20/tonne on margin recovery

28 March 2012 23:59  [Source: ICIS news]

LONDON (ICIS)--European March caprolactam (capro) contract prices have increased by €20/tonne ($27/tonne) because of the need to recover margins, buyers and sellers said on Wednesday.

European capro contracts settled at €2,200–2,270/tonne FD (free delivered) NWE (northwest Europe).

The price increases came in spite of a €52/tonne fall in the upstream March benzene contract price, and were aimed at recouping margins lost to benzene during the fourth quarter of 2011 and the first quarter of 2012.

The benzene contract price is €226/tonne higher than in October 2011, an increase of 32%.

Compared with October 2011, capro contract prices have increased by €30–50/tonne, a rise of just 1–2%.

Capro supply remains tight in Europe, a result of planned maintenance by major chemicals producer DSM. There were also reports of production problems at other European producers, but although some minor setbacks were confirmed, producers involved said these problems were now resolved.

Dutch DSM began a five-week turnaround at its 250,000 tonne/year plant at Geleen, in the Netherlands, in early March. There was no update on the production situation available from the company this week.

Views on when availability will increase are mixed. Several sources expect market tightness to ease in April. Other players, however, said that low producer inventory levels would keep availability low until at least May.

Views on demand are equally mixed, depending on end-use.

The majority of sources both in capro and the downstream nylon 6 (or polyamide 6) market said that textiles demand is weak. Nevertheless, a minority of players said that textiles buying interest had beaten forecasts throughout the first quarter.

In the automotive industry, demand from premium vehicle manufacturers remains high. Demand from mass-market producers, however, is weakening because uncertain macroeconomic conditions have weakened consumer confidence, causing them to avoid purchasing large ticket items such as cars.

Exports to Asia have been low for several weeks because of oversupply in the region and unattractive netbacks. Some exporters said that end-user demand is increasing because of restocking, and that they are now finding some interest in offers at $2,800/tonne (€2,100/tonne) CFR (cost and freight) China. Nevertheless, this was not confirmed by local Asian sources, which continue to see falling prices and weak demand.

Asian March capro contract prices fell by $30–50/tonne this week to $2,700–2,750/tonne CFR China, because of low demand caused by a slowdown in Chinese economic growth, lower exports and rising labour costs. This has resulted in bearish sentiment in the market.

Chinese import levels in February rose by 32% month on month to 85,356 tonnes, according to China Customs. This took several European exporters by surprise, as the import figures are at odds with market sentiment on February, leading several to say that the export situation was not as bad as had been perceived. The Chinese import statistics are for global import volumes, not just European volumes.

($1 = €0.75)

Read Paul Hodges' Chemicals and the Economy blog

By: Mark Victory
+44 208 652 3214

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