16 April 2013 17:32 [Source: ICIS news]
LONDON (ICIS)--A European nylon 6 producer is predicting that consolidation will take place in 2013 if margins cannot be improved, it said on Tuesday.
“Profits are none. [We] break even more or less. From time-to-time [we’re] even lossmaking... I think air is getting thinner and thinner because of the [upstream] benzene [contract price] is staying on this high level so some decisions finally should be made.” the producer said.
The producer said that margins are now so low that it is only breaking even and at times making a loss because of high upstream benzene costs which cannot be passed through the polyamide chain due to weak demand.
“Nobody is able to throw money behind deliveries. I think some action should be done if we continue in this way. Either [the cost of ] feedstock has to go down or some capacity has to be cut. [One of the two] has to happen this year,” the producer said.
European nylon 6 producers are targeting price increase of €0.05/kg ($0.06/kg) in April contract negotiations because of the need to restore margins.
Nylon 6 buyers are targeting price decreases of €0.05/kg in April contracts because of weak demand, oversupply and their own need to increase profitability.
Demand is weak because of poor macroeconomic conditions which have limited consumer purchasing power – particularly in the fibre market. According to market estimates, demand is in line with Q1 levels. Q1 2013 automotive demand was previously estimated by market players at around 15% below Q1 2012 levels.
Several sources said that material previously earmarked for Asia is arriving into Europe from the Former Soviet Union (FSU) because of increased capacity in Asia. The arrival of FSU material coupled with weak demand has caused oversupply in the region.
($1 = €0.77)
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