02 October 2013 16:57 [Source: ICIS news]
LONDON (ICIS)--European caprolactam (capro) October discussions are at an early stage with the majority of buyers and sellers expecting downstream nylon 6 October contract prices to play a large role in capro movements this month, they said on Wednesday.
Nylon 6 contract prices have been stable since July, meaning that they have taken a back seat in capro negotiations in the past few months.
Nevertheless, with several sources in both the capro and nylon markets expecting October nylon 6 contract prices to fall, downstream price movements are likely to be a major discussion point in capro contract negotiations.
“It comes from polyamide 6 downstream. It's not good for it to drive things as it's taking out some margins out of the whole value chain. There will be a fight between customers of the two products [nylon and capro].
"Yeah, PA will play an important role this month, we had stability the past few months which is why it hasn't been in the foreground, but it might be the case for this month,” a capro producer said.
Capro buyers and sellers are yet to set firm targets for October, and discussions are unlikely to begin in earnest until after the 47th annual European Petrochemical Association (EPCA) meeting in Berlin from 6-9 October.
“Our position is clear we want a rollover to hold margins… With EPCA now we're all waiting for the meetings,” a producer said.
Some initial discussions, though, have taken place. Buyers are aiming for price falls of up to €51/tonne ($69/tonne), in line with a drop in feedstock costs in October.
Capro buyers further argue that they will not accept anything less than a mirror of downstream nylon 6 movements, because of the need to preserve margins.
“Of course the market is difficult so there will be discussion. I think the first shot will be full benzene and they will ask rollover. Then I think maybe some kind of sharing is of course logical, but the market dynamics will decide if it will be 50/50,” a buyer said.
One buyer said that margins are now so low that any further erosion would force them to suspend downstream production.
“We're going to go for the full benzene on capro. Producers targeting a rollover wouldn't surprise me, it won't happen for sure - it's a matter of saying how much it will decline compared with polymer. We're not going to lose margin, that's for sure. I'd rather stop the line,” the buyer said.
Capro producers, however, are targeting a rollover in prices, arguing the need to restore their own profitability.
Capro contract prices have fallen by €42-65/tonne since October 2012. In the same period, CX contract prices have fallen by €13/tonne, although this will extend to a fall of €64/tonne if the Q4 CX delta is fully confirmed.
($1 = €0.74)
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