Asia Chemical Profile: Nylon

02 April 2012 00:00  [Source: ICB]

Asia nylon capcityUSES

Nylon (polyamide) comes in two forms: type 6, based on caprolactam (capro) and type 6,6, based on adipic acid and hexamethylene diamine (HMDA). Most nylon production is used in the manufacture of clothing and carpets. Nylon is also used in engineering plastics for the electrical, electronics and automotive sectors.

SUPPLY/DEMAND

The price of nylon chips in Asia is largely determined by the price of its raw material capro. The tight supply of capro had led to record high levels of nylon textile chips prices in March 2011. However, the downstream nylon industry quickly slumped under high feedstock cost pressure.

Nylon consumption has also been severely affected by sovereign debt woes in the eurozone, and the tightening of monetary policy by China to control inflation. Decreased buying appetite of high-end textile nylon products from Europe will also continue to depress nylon demand in Asia. Textile nylon may be increasingly replaced by cheaper polyester, especially in these fragile economic times, one Taiwanese producer said.

PRICES

In the week ended March 20, nylon textile chips (semi-dull) were at $3,200-3,250/tonne CFR (cost & freight) China, as assessed by ICIS. Selling notions were at $3,250/tonne CFR, but sellers said they were unable to secure large volumes of sales, as buying ideas were at $3,200/tonne CFR China.

Downstream buyers were also cautious about buying nylon chips at current prices as business in the downstream nylon yarn sector remains poor.

The yarn segment has been suffering from poor sales because of a lack of export orders amid the eurozone debt crisis.

TECHNOLOGY

Nylon 6 is made from reacting capro with water and a molecular mass regulator, such as ethanoic acid. This is heated under nitrogen to 500K. In nylon 6,6 production, adiponitrile - from butadiene (BD) or propylene - is converted to HMDA, which is then heated with adipic acid (from benzene) to form a salt.

Ethanoic acid is mixed into a solution with the salt and the mixture is heated to about 500K. As pressure develops, the temperature is raised to 540K and the steam bled off. The pressure is reduced and the polymer is extruded under nitrogen to yield a lace, which is then granulated.

OUTLOOK

China's import dependency will fall as more domestic capacity comes on stream. Rising demand is not the only driver behind the rapid expansion of nylon 6 capacity in China, however, as antidumping (ADD) tariffs implemented in April 2010 have raised the cost of nylon chip imports.

The tariffs, imposed on nylon 6 chips imported from the US, EU, Russia and Taiwan, have ranged from 4% to 96.5%, and will be levied for five years.

Asia nylon chipsThe nylon market is also moving towards vertical integration, where downstream nylon chip end-users are increasingly prompted to tap upstream markets and increase participation in the manufacturing process itself for their own captive use.

For example, China-based nylon chip producers such as Liheng Polyamide and Jinjiang Technology - traditionally textile-spinning manufacturers from the downstream yarn segments - are slated to produce their own nylon chips for captive use in 2012.

Downstream demand growth for nylon is also gradually concentrating in China, where capacity expansions were launched aggressively. An expected 615,000 tonnes/year of new capacity will come on stream, mainly in East China in 2012 alone.

With China dominating the global nylon textile market both as producer and consumer, some industry participants express concern that Taiwan's nylon industry cannot carry on "business as usual," and it may require a fundamental change in outlook. China buyers must also pay an ADD rate of 4.0-4.3% on imports from Taiwan.

Taiwan has always been the technology leader in this field, says a Taiwanese producer, and will still have a slight advantage during the next two to three years. Other sources take a more bullish position, noting that China relies heavily on Taiwan's production capacity, importing more than 70% of the nylon chips consumed by its domestic nylon yarn market. In addition, labor contributes very little to the cost of producing fiber.


Author: Feliza Mirasol and Junie Lin



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