INSIGHT: Asia capro trading scene will shift on new capacities

21 August 2012 11:53  [Source: ICIS news]

By Junie Lin

BRISBANE (ICIS)--As new Asian caprolactam (capro) nameplate capacities build up the trading scene is likely to change dramatically as the region reduces its dependency on imports from the west.

Asia had only around 10 producers, but a series of caprolactam expansions have been slated in Asia this year and well into 2013, namely led by China’s petrochemical major, Sinopec Baling Petrochemical, and other newcomers. (see table)

Contracts will be the first to evolve in the new world order.

On 15 August, Taiwan’s China Petrochemical Development Corp (CPDC) has also decided to resume contract supply of capro to Li Peng Enterprise after a previous cancellation.

CPDC cancelled its contract supply of capro to Li Peng from February this year as the latter had breached the agreement by taking 80% less volumes than contracted in November 2011.

CPDC accounts for around 15% of Li Peng’s capro supply, according to market players. Li Peng is the largest nylon (or polyamide) maker in Taiwan, with an annual production capacity of 400,000 tonnes, according to ICIS data.

As a key consumer of capro, Taiwan is likely to reduce its dependence on imports as local supply increases.

A company source from CPDC said that plans to increase overall operating rates at the capro plant are expected in the short term, in order to meet the contract requirements by Li Peng.

CPDC, the sole capro producer in Taiwan is capable of producing 400,000 tonnes/year, inclusive of its new 100,000 tonne/year line in Toufen, Miaoli country.

‘Original plans to export two-thirds of its new 100,000 tonne/year capacity are likely to change into local consumption instead,’ he added.

Taiwan imported a total of 1,339,814 tonnes of capro in 2011, according to trade statistics by The Bureau of Foreign Trade, MOEA. This equates to more than 110,000 tonnes per month.

Other downstream nylon makers are likely to increase their contract volume from CPDC too.

Among the nylon makers based in Taiwan are Formosa Chemicals Fibre Corporation, Zig Sheng Industrial Co and Hualon Corporation.

Procuring capro from a local producer also has its advantages.

First, it will also help to protect local enterprises.

At the same time, local product means procuring molten material compared to flaked material from Europe. Melting down the flaked material requires additional processing and brings about extra costs of production.

Another major importer of European caprolactam, China is also expected to reduce spot imports upon new capacity expansions. China imported 542,578 tonnes of capro in 2011, an average of 45,000 tonnes per month, according to data from China customs.

China is expected to welcome 625,000 tonnes/year of new capacity in 2012 alone, and another extra possible 900,000 tonnes/year in 2013 (see table below).

Another deterrent to deep seas imports are antidumping duties (ADD).

European and US-origin cargoes are subject to a hefty ADD, which make them unattractive for Chinese importers.

China imposed a five-year ADD on capro imported from the US and Europe starting from 22 October. The country has been implementing provisional ADDs on capro from these origins ranging from 4.3% to 25.5% since 25 January 2011.

Bearish general economic conditions have limited consumer purchasing power of capro, suppressing demand from the end-use small- and mid-sized nylon chips manufacturers since late last year.

Domestic nylon chip producers, the biggest downstream industry for capro, feel squeezed as the duties are an additional cost.

Although spot volumes give more flexibility over consumption than contracts, many nylon producers in China said they had not made a decision on whether to increase their domestic purchases as they needed to consider several factors such as price, quality and delivery terms.

Table: 2012-2013 Expansions

Company

Region

Country

Location

Type

Capacity

Unit

Onstream Date

Status

Juhua Group Corp

Zhejiang

China

Quzhou

Expansion

25000

tonne/year

Apr 2012

Operating

Shandong Haili Chemical Co

Shandong

China

Zibo

Total

200000

tonne/year

Mar/Jun 2012

Operating

Zhejiang Hengyi Group

Zhejiang

China

East China

Total

200000

tonne/year

May/July 2012

Operating

China Petrochemical Development Corp (CPDC)

Miao-li

Taiwan

Toufen

Expansion

100000

tonne/year

Q3 2012

Operating

Shandong Fangming Chemical

Shandong

China

North China

Total

100000

tonne/year

Q3 2012

Underway

Sinopec Baling Co

Yueyang

China

Yueyang, Hunan

Expansion

100000

tonne/year

Q4 2012

Underway

DSM Nanjing Chemical Co (DNCC)

Jiangsu

China

Nanjing, Jiangsu

Expansion

200000

tonne/year

Q3 2013

Underway

Baling Petrochemical

Fujian

China

Fujian

Total

200000

tonne/year

2013

Planned

Hebei Sanning Chemical

Hubei

China

Zhijiang

Total

200000

tonne/year

Mid 2013

Under Construction

Baling Petrochemical

Guangdong

China

South China

Total

200000

tonne/year

2013

Planned

Abel Chemical

Jiangsu

China

Taixing, Jiangsu

Total

100000

tonne/year

Post 2013

Under Construction


Additional reporting by Dolly Wu


By: Junie Lin



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