Europe December capro negotiations continue, significant rises anticipated

LONDON (ICIS)–December contract negotiations have continued in the European caprolactam (capro) market this week, with most players yet to reach an agreement amid challenging market conditions, due to the hike in upstream costs for the month, sources said on Wednesday.

With the monthly benzene contract surging by €145/tonne, most sellers are still targeting increases in line with the rise.

Some producers have pointed towards what they see as balanced to tight supply and strong demand for the time of year for why prices could increase fully in line with benzene’s rise.

Adding to this, pressure from previous month’s settlements, in which upstream benzene prices firmed but capro contracts either rolled over or rose below the benzene contract rise, is also influencing negotiations.

This situation, according to multiple producers, has significantly impacted margins in the European capro market.

“Given the fact capro has been absorbing a lot of raw material price increases in the last months, we have reached a level where all capro producers are asking for a similar increase because it’s necessary… everybody knew [a large] benzene increase was coming for December,” one producer commented.

Most buyers, however, are pointing towards prices in the downstream nylon 6 market, which are now not expected to rise as much as the benzene increase for December, and what they see as varied demand for nylon 6, depending on the sector, for reasons why capro prices are likely to settle with some compromise between the two markets.

Nonetheless, players from both sides of the market now expect sizeable increases as the Christmas holidays approach and downstream market activity begins to quieten.

The November contract price was assessed up at €2,179-2,341/tonne FD (free delivered) NWE (northwest Europe), an increase of €10/tonne on the low end of the range.

Looking ahead to January, most players expect bullish demand in the downstream market to drive capro buying appetite and prices to again be influenced by any further movement in the upstream benzene market.

Potential rises in Asian prices and any significant lengthening in the downstream Europe nylon 6 market amid further material from new capacity coming into the market could also influence pricing in opposite directions, complicating the market.

Caprolactam is used to make nylon 6 fibres for textiles and carpets, and engineering plastics for electronics and automobiles.