Chemical Profile: Europe cyclohexane

31 May 2013 09:33  [Source: ICB]

USES

Nearly all cyclohexane (CX) is used in the production of nylon intermediates adipic acid (ADA), caprolactam (capro) and hexamethylene diamine to make nylon 6 or 6,6. Smaller outlets are as a solvent, a reaction diluent and in chemical synthesis. It is also a starting material to produce cyclohexanol-cyclohexanone - KA Oil.

PRICES

EU CXThe European contract price is mostly settled quarterly at a delta to benzene. Rises in the CX contract price in the past year 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 Q2 CX delta contract settled at an increase of €5/tonne compared with the Q1 delta, buyers and sellers involved said.

The increase was attributed to tight supply. European CX spot prices soared above contract levels towards the end of May because of heavy buying interest from the US.

Spot prices are expected to remain at a high premium against contract prices while export demand remains high and while the CX market in Europe remains tight in 2013.

SUPPLY/DEMAND

US buying interest is believed to be linked to production problems at a local producer, but this could not be confirmed at source.

Export consumption has tightened the CX market. It is expected that the US market will continue to consume from Europe until at least August. There has also been market talk of production problems at a European producer, but this could not be confirmed. Downstream demand in Europe, meanwhile, remains weak because of poor macroeconomic conditions.

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

Downstream European caprolactam (capro) demand in May has been estimated by market sources at 15-20% below the same month in 2012, and nylon demand in May 2013 at 10% below the same month in 2012.

TECHNOLOGY

Most production is based on the catalytic hydrogenation of benzene, either by liquid- or vapour-phase methods in the presence of a highly dispersed catalyst or in a catalytic fixed bed.

Processes differ mainly in the means of removing the heat of reaction. Minimum reactor temperatures are preferred for maximum benzene conversion and minimum CX cracking.

EU CXMost plants use reformer offgas, which yields benzene and large amounts of hydrogen byproduct. Hydrogen and benzene costs are critical for manufacturing economics, with plants often located near large refineries where low-cost feedstocks are available.

OUTLOOK

The CX market is expected to remain tight until August because of production problems believed to be taking place in Europe and the US. Nevertheless, end-use European consumption is expected to be anywhere from flat with 2012 levels to a fall of 10%, depending on Asian buying interest for capro and ADA. Asia is typically a major importer of Europe capro and ADA; however, increasing domestic capacity in the region has led to material previously earmarked for export remaining within Europe.

There is estimated to be a structural oversupply of European capro of 1m tonnes/year.

As a result, some integrated producers are diverting capro previously earmarked for export into the production of additional nylon 6, causing an oversupply in that market.

Margins throughout the downstream polyamide chain have been weak throughout most of 2013 and sources in several downstream markets have predicted that consolidation may take place in 2013 if profitability cannot be improved. However, weak demand and oversupply have been preventing margin recovery downstream.

Some market sources estimate that world-wide car ownership - a key end-use application for the polyamide chain - will increase by almost 50% by 2020. Most of this growth will be in the premium automotive industry as the new middle class seeks to adopt luxury brands as a status symbol. As a result, the gap between premium and non-premium automobile demand is likely to increase, which will drive innovation in performance-specific parts for premium automobiles.


By: Mark Victory
+44 208 652 3214



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