10 July 2013 17:17 [Source: ICIS news]
LONDON (ICIS)--Early European caprolactam (capro) July contract price discussions are focusing on reductions of €20-30/tonne, driven by a €67/tonne ($86/tonne) fall in the upstream benzene July contract price, buyers and sellers said on Wednesday.
“The first [July contract price] ideas have been exchanged, but nothing more. Benzene is giving some relief so it's a matter of how to share [the July contract price drop. Part [of the benzene fall] will be given away, minus €20/tonne to minus €30/tonne is what I'd be thinking of,” a capro producer said.
Nevertheless, despite buyers and sellers’ targets being close together, negotiations are expected to be protracted as both sides adopt a cautious approach in July because of volatile trading conditions.
“I think we'll need a few more weeks to conclude capro,” a producer said.
Producers are holding back from agreeing contract prices before the direction of the August benzene contract price becomes more transparent.
Capro producers are unwilling to risk a potential rise in the August contract price as the month typically sees downstream holiday closures, which will make it difficult to pass any cost hike through the polyamide chain.
“If the benzene [contract price] increases in August it couldn't be passed [through the chain]. It's better to be very prudent and monitor the benzene in the next two weeks to make sure we don't make a mistake,” a producer said
Buyers are unwilling to conclude capro contracts until after downstream nylon 6 July contracts have been agreed.
“It depends on polymer [nylon 6 July contract prices] in my opinion. It seems polymer is going down more than expectations. Some applications are showing some weakness. We hope to stay in some kind of reduction and capro has to follow. To make some provision today is difficult,” a buyer said.
A reduction in nylon 6 contract prices is widely expected, and capro buyers argue that downstream margins are so weak that any reduction in the nylon 6 July contract price will need to be reflected in the capro contract price.
“[There has been] too many changes over the month the last few months so we're cautious,” a buyer said.
($1 = €0.78)
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