Price and market trends: Europe polyamide chain producers aim to pocket feedstock cost falls

12 April 2013 09:53  [Source: ICB]

Producers in the European polyamide chain are aiming to keep back as much of the upstream cyclohexane (CX) monthly contract price falls from being passed on to consumers as possible to restore margins, they said in the week ended 7 April.

Margins throughout the polyamide chain have been weak since mid-2011, as poor demand has not allowed upstream CX cost hikes to be passed on to customers.

Automotive production Rex Features

 Rex Features

Slump in European automotive production has hit demand for polyamides

Adipic acid (ADA) contract prices have fallen by €225-260/tonne ($288-333/tonne) between June 2011 and March 2013. In the same period, caprolactam (capro) contract prices have fallen by €270-330/tonne, nylon 6 contract prices by €420-460/tonne, and nylon 6,6 contract prices by €50-220/tonne. Conversely, the feedstock CX monthly contract price has increased by €204/tonne.

WELCOME BUT INSUFFICIENT

"We expected initially a €100/tonne decrease [in feedstock costs], which would have made things easy. Being only [around a fall in CX costs of] €60/tonne is welcome, but insufficient. Our point is to try to make a rollover and keep the €62/tonne [the size of the upstream benzene contract price fall] because we really need it," a capro producer said.

Rises in the CX contract price have predominantly been driven by benzene contract price increases. The monthly CX contract price is composed of the sum of the monthly benzene contract price and the quarterly CX delta contract.

The major end-use markets of the polyamide chain are automotives and fibre. Weak consumption from these industries has prevented the feedstock cost increases from being passed through the chain. Low end-use demand is the result of poor macroeconomic conditions, which have reduced consumer purchasing power.

Nevertheless, consumption levels are divided, depending on end-use application and customer base. Premium automotive demand remains strong because of exports to Asia, caused by upward social mobility in the region. Non-premium automotive demand remains weak, with buying interest in April estimated at approximately 20-25% below the same month in 2012, according to market estimates.

REGISTRATIONS DECLINE

New registrations for commercial vehicles in the EU continued to decline in February, according to data from the European Automobile Manufacturers' Association (ACEA) on 3 April.

In February, demand for new commercial vehicle registrations was down for the 14th consecutive month in the EU, dropping to 109,331 units, a fall of 13.3% compared with the same month the year before.

New passenger car registrations in the EU fell by 10.5% year-on-year in February 2013, according to ACEA statistics.

EU Nylon 6

The majority of sources said that, despite the approach of the peak-season for automotives and fibre, an earlier than usual Easter holiday period has meant that there is yet to be an increase in demand.

The April CX contract price fell by €57/tonne compared with March. Capro producers are aiming to prevent passing on as much of the benzene contract price reduction as possible. Some producers are targeting a rollover in April capro contracts, while others are aiming to limit price falls to €10-15/tonne.

Several capro buyers said that they accept that producers' margins against feedstocks are low, but that they expect at least a 50% share of the cost fall because of their own need to restore profitability downstream.

Several ADA buyers are targeting a price reduction of up to €50/tonne in April contracts because of feedstock costs. Buyers said that despite supply shortages, the market remains oversupplied and demand is weak.

Producers, conversely, are targeting price hikes of up to €50/tonne, citing the need to restore profitability and low availability in the market.

Production at one of Germany-based BASF's ADA lines in Ludwigshafen has been suspended until June for maintenance, a company source said. The maintenance has taken approximately 25% of the plant's nameplate capacity of 260,000 tonnes/year offline.

Nylon 6 and 6,6 producers are aiming for a rollover in contract prices in April.


By: Mark Victory
+44 208 652 3214



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