20 March 2013 18:06 [Source: ICIS news]
LONDON (ICIS)--A large amount of European caprolactam (capro) consolidation is needed because of additional capro capacity in Asia, a European producer said on Wednesday.
The producer said that demand in Europe is only enough to cover 30% of merchant market production in the region, and, as a result, additional capacity in Asia will require a large amount of consolidation in Europe.
“Export [opportunities] will be limited for the Europeans. There's only a demand for 30% of the merchant supply [produced in Europe]. There needs to be a big, big rationalisation to get a balanced demand,” the producer said.
Asia has traditionally been a major importer of European capacity. Nevertheless, large amounts of additional capacity due to come onstream in the next few years in Asia will result in material previously ear-marked for export remaining in Europe – causing potential oversupply, sources said.
There is uncertainty as to the impact of Asian capacity expansion on Europe because, according to sources, the impact of additional Asian capacity will be limited until producers in the region are able to manufacture capro for high-speed spinning applications.
“More or less the challenge will be how increasing capacity in Asia and decreasing demand in Europe will go,” a capro buyer said.
Opinion was divided on when this will happen, with some sources expecting Asian producers to begin manufacturing capro for high-end applications within the next 1-2 years.
“In my opinion it's a question of time - people learn very fast. In one or two years probably one of the new [Asian] producers will be able to produce capro for high-speed spinning. The local market in US and Europe will be affected. It's a question of time,” another capro buyer said.
The long-term outlook for the European capro market is uncertain, sources said. There is underlying growth in end-use markets because of global mega-trends such as light-weighting in automotives and upward social mobility in developing regions. It remains unclear how much this will counterbalance additional Asian capacity.
“[European capro is a] fractured market, [with an] uncertain outlook. Everybody's just looking at their own supply chain and markets. Putting that together is difficult,” a capro producer said.
($1 = €0.78)
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