Europe capro producers revise down April expectations

17 April 2013 23:59  [Source: ICIS news]

LONDON (ICIS)--Early April European caprolactam (capro) contract prices have settled at a reduction of €10-25/tonne, and although negotiations between many contract partners are ongoing, the majority of players are expecting contract prices to finalise within this range.

Producers had been targeting a rollover in prices to restore margins against upstream benzene. Nevertheless, buyers argued that demand is too weak to support this and that their own margins in the downstream nylon 6 sector are too low for them not to receive some of the feedstock pass through.

One nylon 6 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 of weak demand. The producer added that if the situation does not improve then consolidation would become necessary in 2013.

Rising benzene spot prices  despite weak fundamentals  have led to speculation that May benzene contract prices could reverse the reductions seen in April. This has served to limit buyers' demands for the full benzene price pass through, and falls of €10-25/tonne are seen as a compromise position.

Demand is weak because of poor macroeconomic conditions, which have limited consumer purchasing power in the downstream fibre and automotive markets. Automotive demand in April 2013 has been estimated to be around 10% below April 2012 levels.

Some producers and buyers said that automotive demand in April is weaker than in March, which is a major concern as April typically sees the beginning of the peak-season in the automotive industry  which several buyers and sellers are predicting will not occur this year because of poor general economic conditions.

($1 = €0.76)

By: Mark Victory
+44 208 652 3214

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