Asia capro may stay firm after two-month spike on tight supply

02 September 2016 06:47 Source:ICIS News

Nylon factory in Zhejiang, China

SINGAPORE (ICIS)--Spot caprolactam (capro) prices in Asia may remain supported in the near term, after surging by about 10% over a two-month period, as the market continues to grapple with tightness in supply, industry players said on Friday.

Prices were assessed at their highest so far this year at $1,350-1,360/tonne CFR (cost and freight) NE (northeast) Asia on 31 August, according to ICIS data.

Limited availability of spot capro cargoes owing to unplanned turnarounds in Europe and Asia had driven up prices since late June, the data showed.

Netherlands-headquartered Fibrant Chemical had shut its capro line in Jiangsu province, China in mid-July because of production problems, and declared a force majeure at its Geleen capro unit in the Netherlands in early July. The two plants have resumed normal production in late August.

However, supply of spot capro has remained tight moving into September.

With a portion of the August contracts concluded higher by $65/tonne month on month at $1,430/tonne CFR NE Asia for Taiwanese buyers, some end-users turned to the spot market this week, hoping to secure cargoes at lower prices, market sources said.

“Current spot prices are still much lower compared to the August contract prices that have been settled thus far, which makes buying spot cargoes more attractive in current market conditions,” a Taiwan-based buyer said.

“However, many suppliers have very limited availability of spot cargoes. Some of the producers seem to have already sold out September shipment cargoes,” the buyer said.

Some market players expect spot capro prices to remain firm in the coming weeks, with supply in the key China market likely to remain tight, and supported by the strong feedstock benzene market.

“Feedstock benzene prices are still quite firm, and even though spot prices have been on the rise in recent weeks, margins for many capro producers are still squeezed,” a northeast Asian producer said.

“Smaller and medium-sized capro makers active in the domestic Chinese market are still running at relatively low run rates in September, and at current margins, they will not be incentivized to increase their operating rates significantly,” the producer said.

But with most capro plants having restarted from recent turnarounds and gradually ramping up operating rates, increased supply may cause prices to soften in the near term, other market players said.

Prices of capro are unlikely to receive any support from downstream nylon chips, buying appetite for which goes on a seasonal lull in September and October, they said.

Focus article by Leanne Tan

Asia CPL 2 Sep 2016

Picture: Factory of nylon, the downstream of caprolactam, in Zhejiang, China (Source: REX/Shutterstock)

By Leanne Tan