17 April 2013 17:56 [Source: ICIS news]
LONDON (ICIS)--European caprolactam (capro) demand is falling due to reduced exports to Asia, in particular China, buyers and sellers said on Wednesday.
Chinese demand for European material is low because players in the region have moved to the sidelines until the April contract price is finalised, European exporters said.
“The Chinese customers are clearly on a stand-by basis: they're waiting on final [contract price] decrease in April. They buy on a very daily basis. Basically volume-wise it's like a paralysis. Discussions ongoing, which is rare as usually contracts are agreed soon. I guess more material [is] remaining in Europe - especially those that would usually go to Asia,” a capro producer said.
Unlike in Europe, where contract negotiations typically settle at the end of the month, Asian contracts are usually finalised at the beginning of the month.
Asian contracts talks are in deadlock because of a wide buy-sell gap.
This has increased European supply, because material previously earmarked for export is remaining in Europe. According to one capro producer, there is a surplus of European capacity compared to domestic European consumption of around one million tonnes per year. Asia has traditionally been a major importer of European capro.
“In the case of capro you have one million tonnes in Europe roughly [of] consumption, and capacity of two million tonnes. If Europe cannot export any more - or at least not as before - there's a huge problem,” the producer said.
Consumption in Europe has been further limited by poor macroeconomic conditions, which have limited consumer purchasing power in the downstream fibre and automotive markets. Automotive demand in April 2013 has been estimated at 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. Several buyers and sellers are predicting the peak will not occur this year because of poor general economic conditions.
“Traditionally yes we would see the market waking up [in April], but for the time being no signals at all... [the] general trend in economy and crude oil is putting some sort of question mark on the recovery of business in Q2 [the second quarter],” a capro producer said. ($1 = €0.76)
($1 = €0.76)
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