25 April 2012 23:59 [Source: ICIS news]
LONDON (ICIS)--European April caprolactam (capro) contract price discussions have drawn to close and prices have come down by an average of €50/tonne, market participants said on Wednesday.
European capro contracts settled at €2,150–2,220/tonne ($2,829–2,921/tonne) FD (free delivered) NWE (northwest Europe).
The drop in the value of capro was caused by lower benzene prices, a weaker Asian market and slower-than-expected demand from downstream nylon.
A major producer said it lowered its price by €40/tonne, while large consumers said they had achieved reductions of up to €60/tonne.
Another large producer said it did not see any of its April contracts settling by more than a decrease of €37/tonne.
“We would rather not supply than go below €37/tonne. We are fully booked and the market is tight,” the second producer said.
One buyer said: “Material is available... more than expected. In Asia demand is low and even in Europe I feel that something is happening. Automotive demand is still okay, but fibre [demand] is so-so.”
A second large buyer said it had closed its April contracts at reductions ranging between €40/tonne and €60/tonne.
“We closed at the full [April] benzene [decrease] plus a small increase. The March benzene decrease went into the pockets of the suppliers. Availability has improved and I see the caprolactam and polymer markets as long,” the buyer said.
A third consumer also confirmed that its contract price came down by €40–€60/tonne.
A main talking point for many European capro buyers is weakness in Asia.
Over the past two years, European producers have been flaking caprolactam and exporting it to China because there was insufficient local production and demand was stronger than it is now in the downstream nylon 6 (polyamide 6) market. However, this is slowly changing with new plants coming on stream.
“Producers have enjoyed selling at prices with margins accumulating all the profit in the value chain, making whatever they liked. Now there are 500,000 tonnes coming on stream, which will reduce imports,” said a major buyer.
Asian and European capro prices are almost at parity on a net basis.
Asian spot prices are at a euro equivalent of €1,900–1,923/tonne CFR (cost & freight) China Main Port.
“On a net, net basis caprolactam prices in Europe are almost at the same levels as Asia, maybe a little bit higher. For a long time I have been saying that China is slowing down,” said another buyer.
The buyer also spoke about price developments in feedstock benzene, which is also used by producers and consumers as a negotiating tool.
“Look at the past two years, when benzene went down, caprolactam prices went up. What we need to see now is benzene going up and capro prices coming down,” the buyer said.
The European benzene contract settlement for March was agreed at €927/tonne, down by €52/tonne from February, while the March capro contract price increased by €20/tonne.
The May benzene contract price is due to settle on 30 April. Spot benzene is trading at €50–60/tonne above the April contract price.
Meanwhile, European nylon 6 contract prices for April have decreased because of lower-than-expected demand and lower feedstock costs. Virgin polymer nylon 6 prices moved down by an average of €0.03/kg to €2.37–2.62/kg FD NWE.
($1 = €0.76)
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