US AdvanSix expects continued nylon oversupply - execs

Author: Stefan Baumgarten

2020/02/21

HOUSTON (ICIS)--US nylon 6 producer AdvanSix will continue to face unfavourable industry conditions in nylon amid industry oversupply and weak demand in the near-term.

Meanwhile, the company has a "neutral" outlook for its ammonium sulphate (AS)  and chemical intermediates businesses in 2020, CEO Erin Kane and CFO Michael Preston said during AdvanSix’s Q4 earnings call on Friday.

Nylon was off to a slow start in 2020, following a tough 2019. With the ongoing challenges, total market pricing will likely be a “headwind” for the company in 2020 on a year-on-year basis, they said.

CORONAVIRUS
Among the factors affecting the nylon industry going into 2020 is the coronavirus crisis in China, which hit in particular industry logistics, CEO Kane said.

AdvanSix has no production in China and the country accounts for only about 1% of its total sales.

However, given China’s big role in global nylon, AS and chemical intermediate markets, the crisis has “second- or third-order” impacts, Kane said.

AdvanSix is monitoring the situation closely and looking out for changes in trade flows in and out of China in the wake of the crisis, which could lead to challenges or opportunities, she said.

“There could be disintermediation, that provides opportunity as well,” she added.

In addition to nylon 6, AdvanSix produces caprolactam, used to make nylon 6 resin; AS fertilizer, derived from the caprolactam process; and chemical intermediates, in particular acetone and phenol.

AdvanSix's total 2019 sale were nearly $1.3bn, with nylon accounting for 27%; caprolactam for 22%; AS for 23%, and chemical intermediates for 28%.

ACETONE
In chemical intermediates, AdvanSix led successful anti-dumping petitions against acetone imports into the US, which should help stabilise acetone pricing and improve that part of the company’s business this year, Kane said.

The petitions were against imports from Singapore, Spain, Belgium, South Africa and South Korea.

The International Trade Commission (ITC) is due to issue by the end of Q1 a “final injury determination” regarding the imports, she said.

Already, in January AdvanSix saw no acetone imports into the US, which helps stabilise pricing, she added.

AMMONIUM SULPHATE
In AS, Kane said that AdvanSix is eyeing AS fertilizer applications in soybeans as an opportunity, Kane said.

Recent studies indicated that farmers can increase returns by adding AS - potentially creating additional AS demand in the US and Brazil of more than 1m tonnes/year, “which is a significant growth opportunity, just in two regions,” she said.