Asia capro likely to continue downtrend on weak market

Focus article by Daphne Ho

SINGAPORE (ICIS)–Asia spot caprolactam (capro) prices softened by $10-30/tonne in the week ended 1 July due to weak downstream demand, a trend market players said was likely to continue in the short term.

Spot capro prices were assessed at $1,700-1,740/tonne CFR NE Asia on 1 July.

Market momentum in China remains weak as Chinese players think that capro will continue to be bearish in the near term because of poor downstream nylon yarn demand, which is likely to drag on until September amid the seasonal off-peak period. 

“Downstream market is very messy now,” said a major Chinese yarn producer.

Operating rates at downstream nylon polymerization facilities in the week have been reduced, with run rates at 79% for Taiwan while rates in China were at 69%.

Inventories at yarn producing plants were escalating, threatening to further lower operations resulting in the cutback on raw material purchases.

Moreover, Sinopec’s Shijiazhuang 165,000 tonne/year caprolactam plant has recently expressed firmer intentions for a new capro facility start-up in July, while Shandong  Fangming’s 100,000 tonne/year line is due to start up in August.

Several other producers have also scheduled their start ups in the third quarter although there can be further confirmation for their start up only nearer to the time.

Two major Chinese producers have returned from turnarounds in early July so there is likely to be more supply coming to the market hence availability of spot cargoes will become longer and prices are likely to face downward pressure.

DSM Nanjing Dongfang (DNCC) plans to restart its 200,000 tonne/year capro line in Jiangsu, Nanjing, on 3 July after a maintenance that began on 9 June.

Jiangsu Haili has restarted its 200,000 tonne/year capro unit in Jiangsu Yancheng on 1 July after a turnaround that started on 20 June.

As a result, many end-users in China are not rushing to purchase import cargoes for August and September arrivals, and were on a wait and-see stance.

On the other hand, Taiwanese players were engaged in spot negotiations as they expect the gap between contract and spot materials to widen.

“Contract negotiations for July will be very tough with the upstream contract price increase amid weakening downstream prices,” said a major Taiwanese contract buyer.

Asia benzene prices in July rose by $85/tonne while US benzene contract prices took a leap, hitting $3.05/gal, equivalent to $921/tonne which is at an increase of $239/tonne from June.

Europe benzene prices sought higher grounds as well, having settled at €792/tonne, at a US dollar concept of $882/tonne.

June capro contracts were concluded at $1,770-1,810/tonne CFR NE Asia, including China and Taiwan.

Meanwhile, prices of nylon chips were at $2,050-2,070/tonne CFR China for the week ended 30 July.

In east China, domestic spot capro prices were at CNY 13,000- 13,100/tonne ex-works, down CNY 300/tonne from the previous week.

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