Asia capro players cautious as global makers cut capacity

19 September 2016 07:11 Source:ICIS News

cargo ships 19 September 2016

SINGAPORE (ICIS)--Caprolactam market players in Asia are cautiously optimistic as major European producers are shutting down plants to reduce global overcapacity, possibly limiting export volumes available to this region, industry sources said on Monday.

The consequent tightening of supply could further boost capro prices, they said.

On 14 September, spot prices were assessed at an average of $1,370/tonne CFR (cost and freight) NE (northeast) Asia, the highest so far this year, according to ICIS data.

Regional prices have been rising since the second half of 2016, supported by limited availability of spot cargoes due to unplanned turnarounds in Europe and Asia.

Asia is a net importer of caprolactam, with China annually taking in 223m tonnes of imported material, 60% of which are from Europe.

On 12 September, Germany’s BASF, which exports capro to northeast Asia, announced a plan to gradually shut down a 100,000 tonne/year capro plant at its Ludwigshafen flagship chemical complex over 18 months.

A buyer based in Taiwan said that the German producer has since halted supplies until further notice.

BASF’s capacity reduction could have an impact on annual contractual capro discussions at the end of the year, a northeast Asia-based producer said.

Market players estimated that the German producer exports around 7,000 tonnes/month of capro under contracts to buyers across Asia.

“As the yearend approaches, most capro market players in the region are gearing up for year-end contract discussions regarding capro volume obligations for the next year… Some buyers may be looking to plug any gaps in requirements [caused by BASF’s plant shutdown],” the producer said.

Netherlands-headquartered Fibrant is also in the process of closing its capro production facility in Augusta, Georgia in the US over 16 months.

Most producers in Asia and east Europe are hopeful that the reduction in global supply could support capro prices in the medium- to long-term, and allow them to generate better margins.

Many global producers of the material have struggled with eroded margins as the capro industry has been structurally oversupplied, following a wave of new Chinese capacities that came on stream in recent years.

Competition from Chinese producers resulted in plummeting capro prices over the past two years, reaching levels deemed unsustainable for some producers.

Downstream nylon producers have also been hit by poor margins, which plagued the capro producers, market sources said.

Other buyers are hopeful that capro gains caused by a tightening of supply could eventually support downstream nylon prices.

 “The [BASF] announcement is not necessarily a bad thing for buyers, because firmer capro prices from the tighter supply could help support downstream prices in the nylon market,” a Taiwan-based buyer said.

Focus article by Leanne Tan

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Photo: Cargo ships (Photographer: Hans Blossey/imageBROKER/REX/Shutterstock)

By Leanne Tan