NF Trading halts Ukraine caprolactam production on poor margins

23 May 2012 14:25  [Source: ICIS news]

LONDON (ICIS)--NF Trading has halted production at its 60,000 tonne/year caprolactam plant in Cherkassy, Ukraine, for maintenance, a source at the Finland-headquartered producer said on Wednesday.

Although originally shut for planned maintenance, the closure has been extended until at least the beginning of July because of poor margins, the source said. The plant was initially shut down on 14 May.

“Everything is bad. One thing is clear, in June we definitely won’t restart [the plant],” the source said.

Caprolactam buying activity in Europe has slowed because the market is unclear of the future direction of prices.

May contract pricing discussions are ongoing, with several players unwilling to set prices until they are more certain of the general economic conditions.

The major causes of uncertainty are volatile upstream benzene prices, bearish macro-economic sentiment and falling Asian caprolactam demand.

Asia is a major importer of European caprolactam, and the fall in Asian consumption has meant that material previously earmarked for export there is remaining in Europe, lengthening supply.

The European benzene market plummeted last week on upstream bearishness amid growing political and economic uncertainty, with May closing at $1,170-1,190/tonne (€924-940/tonne) CIF (cost, insurance and freight) ARA (Amsterdam-Rotterdam-Antwerp).

However, this week opened with a recovery on May pricing. Bids edged up to $1,210/tonne on Monday, while offers were as high as $1,250/tonne. By noon London time on 23 May spot prices saw further gains and were trading at $1,280-1,320/tonne CIF ARA.

“Benzene is unbelievable, last week it was falling like a stone, this week it’s picking up like a rocket. No-one knows what’s going to happen,” a European caprolactam producer said.

Upstream volatility is causing caprolactam buyers to lower inventories to avoid exposure to feedstock cost risk. This is limiting European caprolactam demand.

“We will buy less in June as we prefer to keep low stocks. The uncertainty on raw material prices means we have to wait for some stability as we can’t make any forecasts at the moment,” a caprolactam buyer said.

Fears of an escalation of the eurozone debt crisis are also limiting consumption, as buyers further limit purchasing to limit their exposure to macro-economic risk.

“Sentiment is being affected more by the [macro] economy than the polyamide [chain] dynamics. It’s adding psychological pressure,” a European caprolactam producer said.

Truong Mellor contributed to this article

($1 = €0.79)

By: Mark Victory
+44 208 652 3214

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