Initial Oct Europe nylon 6 contracts rollover, Nov outlook unclear

LONDON (ICIS)–Rollovers look likely for October Europe nylon 6 contracts with multiple producers settling prices steady compared to September, following healthy demand in most sectors, sources said on Tuesday.

Not all players have settled business for the month, however, and further settlements are expected.

As such, the ICIS range for October remains unchanged pending further feedback on concluded business.

At the beginning of the month, some sellers were targeting increases of €0.02-0.03/kg, citing the rise of upstream costs, robust demand, and ongoing turnarounds as reasons for why prices were likely to increase.

As the month progressed, however, it became clear to some participants that supply for standard material was ample, despite the ongoing turnaround, and demand in the downstream carpet sector was weakening, which put pressure on prices to remain steady for October, sources agreed.

The September European nylon 6 virgin polymer contract was assessed down at €2.16-2.31/kg FD (free delivered) NWE (northwest Europe).

Meanwhile, views on demand have varied this week. According to two producers, demand has remained strong in most sectors, with engineering plastics (EP) and compounding markets being particularly healthy.

“There’s not enough capacity to fulfil demand for the month, we need more capacity in respect of EP [and] for compounds they have a lead time of 20 weeks; this is not normal, [orders] are full and demand is extremely high,” one producer commented.

That said, demand in the carpet sector remains sluggish currently, with general demand not as strong as previous months, according to sources from both sides of the market.

“Demand is not as healthy this month because of the high prices for nylon,” a second producer commented.

“Polypropylene and polyester substitutes are being used by some customers creating lower demand for the month,” it added.

Supply has easily kept pace with the overall level of demand, despite the turnaround in Europe and fewer imports from Asia due to rising prices in that region amid a range of upstream production maintenances and anti-pollution measures in China, both sides of the market agreed.

Looking towards November, three countervailing factors are expected to influence price direction and negotiations.

The first factor is the potential impact of anti-pollution measures in China, which are leading to the shutdown of upstream benzene and cyclohexane plants in the country and putting upward pressure on prices there, according to multiple nylon and caprolactam (capro) producers.

If plants continue to close in China, participants in Europe expect raw material costs to rise and to pressure prices in the domestic market as upstream capro volumes are sold into Asia to make-up for lost capacity in the region, as happened last year, sources agreed.

The second factor expected to influence prices is the ramping up of Grupa Azoty’s new nylon 6 plant in Poland, which opened in September.  According to a company source, some material from the new plant is already on sale with increased volumes anticipated for the near future.

According to a third producer, the expected lengthening in the market due to expanded supply could counter any upward pressure from upstream price movements.

“[We expect] new Polish material in the market in November [and the] effect on prices could be mixed,” the producer commented.

“Benzene might go up €50/tonne and nylon 6 nothing because of the new material from Poland,” it added.

The third factor expected to influence price direction is demand. Typically, demand in Europe softens as Christmas approaches, with players looking to reduce stock levels for the end of the business year, sources concurred.

The supply and demand dynamics in Asia, amid an expected continuation of the anti-pollution measures in China and the potential effect it will have on the nylon chain in the region, is likely to greatly influence demand levels in Europe, as occurred last year, market sources agreed.

“Everything is dependent on the activities we see in China, [our] expectations are constantly strong demand… until Chinese New year [and] prices starting to go up step-by-step and volumes down,” the first producer commented.

Nylon, also called polyamide, is used mainly in fibre and engineering polymer applications. Nylon fibres are used in apparel, carpets and home furnishings. Nylon engineering resins are used in automotive parts.

Focus article by Ciaran Tyler 

Image at top: Nylon fishing net. Source: F1 Online/REX/Shutterstock