Asia spot capro may gain on tight supply, higher Aug contract

Daphne Ho

20-Aug-2014

Focus story by Daphne Ho

Asia caprolactam may extend falls on weak benzene, weak demandSINGAPORE (ICIS)–Spot caprolactam (capro) prices in Asia may increase as tight supply caused by unplanned shutdowns, as well as scheduled turnarounds, at major facilities is expected to remain for the rest of August, market sources said on Wednesday.

Negotiation levels edged up this week, with deals concluded at around $2,260/tonne, compared with the assessed prices of $2,230-2,250/tonne CFR (cost and freight) NE (northeast) Asia on 13 August, according to ICIS.

Tighter supply also led to a higher partial settlement for August capro contracts at $2,320/tonne, which represents a $20/tonne increase from July contract, industry sources said.

In China, DSM Nanjing Dongfang Chemical Co (DNCC) has scheduled a two-week maintenance at its two 200,000 tonne/year capro units in Jiangsu. The lines will be shut at intervals, with the first one taken off line on 14 August.

Meanwhile, Haili Chemical’s two capro plants – one each in the provinces of Shandong and Jiangsu – were shut for three to four days of technical upgrade this month. The two plants have a combined capacity of 400,000 tonnes/year.

In Taiwan, China Petrochemical Development Corp’s 200,000 tonne/year plant in Xiaogang had a brief power outage that lasted around three days. Production loss from the power outage was estimated at around 500-700 tonnes.

Russia’s SBU Azot, which is a major supplier of spot capro cargoes to northeast Asia, has shut its 116,000 tonne/year plant in Kemerovo for a 10-day maintenance early in the second week of August. The producer was said to be sold out on spot cargoes until for October loading parcels as well.

For the August capro contract in northeast Asia, regional producers had been generally expecting an increase, in line with higher nomination in the Chinese domestic market, industry sources said.
Sinopec, a capro major in China, has nominated an August capro contract price of yuan (CNY) 18,500/tonne ($3,013/tonne) EXW (ex-works), up CNY500/tonne from July. 

“Chinese domestic contract nomination price remains higher than July levels. There is no reason we should lower prices,” said a Japanese producer.

DNCC also raised its August nomination by CNY440/tonne to CNY18,700/tonne EXW from July.

Some participants are expecting China domestic capro prices to be released later in the week, which will be followed by other northeast Asia capro contracts in the following week.

But capro price gains are not being supported by the downstream nylon chips and yarn sectors, some market players said.

Spot prices of high-speed spinning semi-dull nylon chips were assessed at $2,550-2,570/tonne CFR China, according to ICIS data.

“We cannot pay higher than July [contract] prices considering our nylon chip prices. Small volumes of chips were concluded at $2,550/tonne and above this week, but it is hardly sustainable as the bulk of the buyers are still at around $2,530/tonne,” a source at a major Taiwanese capro buyer said in Mandarin.

“Considering a $280/tonne spread, we cannot accept above $2,300/tonne for capro,” he said.

In Taiwan, nylon polymerization facilities have been operating at low rates of around 68%, while Chinese plants fell by two percentage points to 66% as of 19 August.

“How can we follow? Downstream [market] is worsening,” a Chinese chips producer said in response to the higher capro contract settlement, adding that operating rates have started sliding this week because of rising levels of inventories of chips and yarn.

A major Taiwanese producer is considering shutting one of its bigger high-speed spinning semi-dull nylon chips due to poor demand. Restarting the plant will depend on market conditions.

($1 = CNY6.14)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

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