04 September 2012 23:59 [Source: ICIS news]
LONDON (ICIS)--European nylon 6 and nylon 6,6 August contracts have settled at a rollover, despite the €108/tonne ($137/tonne) increase in the upstream benzene August contract price, buyers and sellers confirmed on Tuesday.
Producers were unable to recoup the benzene cost increase because of weak demand caused by bearish macroeconomic conditions – which have reduced consumer purchasing power – and traditional August end-user absences.
As a result of the rollover, producers are already targeting increases of €0.05-0.10/kg for nylon 6 in September, to recover margins with benzene. The September European benzene contract was agreed at €1,026/tonne FOB NWE, down €35/tonne from August.
Nylon 6 buyers will resist as much of the proposed increases as possible, arguing that downstream markets are not strong enough to support such rises, but accept that nylon producers' margins are squeezed.
Nylon 6,6 can be manufactured either using adipic acid – which is downstream of benzene – or using adiponitrile via butadiene (BD).
The August BD contract price rose by €75/tonne. Nylon 6,6 contracts have settled at a rollover despite the benzene increase and a €75/tonne increase in upstream butadiene (BD) costs.
Although August BD and benzene costs increased, adipic acid contract prices for August (which remain under negotiation) are expected to rollover, due to weak demand throughout the polyamide chain during August. This trend held particularly true for fibre markets.
As a result of anticipated stability in adipic acid costs, and low end-user demand as a result of traditional end-user absences in August, nylon 6,6 contract prices have rolled over.
Demand for both nylon (or polyamide) 6 and 6,6 is increasing as end-users restock following the August break, and September 2012 demand is forecast to be roughly in line with September 2011. Players are predicting that nylon demand in October 2012 will be higher than in October 2011, when fears of a double-dip recession led to earlier than usual year-end destocking.
Although macroeconomic conditions remain bearish, nylon players predict more stable conditions than in 2011, meaning that they are likely to destock in late-November rather than October.
Nylon producers said that the increase in consumption has made them confident in their ability to recover margins against benzene in September.
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