11 October 2013 10:04 [Source: ICB]
Several European caprolactam (capro) sources said that they expect fourth quarter destocking will not be as sharp this year as in 2012.
This is because inventories have been kept at low levels throughout 2013. Buying remains on a just-in-time basis.
“Looking to the market demand, looking to supply, it seems to be not the scenario… it was last year. We’re already in October [and there are] some signs that market was going down rapidly. This year it seems more stable, and I think it will be stable until the end of the year,” said a producer.
“Of course December will be less due to the Christmas [period], but expect it will not be the same as last year – people have maintained low stock levels. Last year it was very high,” the producer added.
2012 saw a sharp sell-off of material in the fourth quarter, which began in October because of oversupply. Low demand was in part responsible for a fall of €50-55/tonne ($68-74/tonne) in the capro contract price between October 2012 and December 2012.
During the same period, the cyclohexane (CX) contract price rose by €86/tonne, adding to erosion in producers’ margins, which they continue to try to recover.
Views on current capro demand are mixed depending on end-use industry. Textile demand remains weak because of poor macroeconomic conditions. Order book volumes in October for textile applications are expected to be 10-15% below October 2012 levels according to estimates from both buyers and sellers.
“We have reviewed the situation for some applications like textiles – something like [a fall in demand of] 5-10% in October compared year on year,” according to a buyer.
Nevertheless, engineering plastics demand has been stable in October 2013 compared with October 2012.
“I hear from textiles in October [year-on-year demand is] down 5-10% in [the] carpet [industry]… but I don’t see it in engineering plastics,” a producer said.
This has been driven by the premium automotive industry, which has been shielded from the impact of the macroeconomic downturn by upward social mobility in developing countries, particularly China.
Another producer said, “Textiles is down 5-10%, I agree, but engineering plastic is okay. Maybe October will be less than usual. On the other hand, it’s true that engineering plastics is improving in Germany, and also Spain it’s a little better. I hope it compensates,” it added. Capro end-use demand is roughly evenly split between textiles and automotive applications.
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