US, Europe CX demand improving, Asia lags

Author: Zubair Adam


LONDON (ICIS)--Based on different dynamics, there are positive signs that cyclohexane (CX) consumption in the US and Europe is improving, but the indications for Asia suggest weaker levels.

Supply in Europe has shifted from long to balanced on the back of reduced operating rates, with sources also citing adjustments to imports and inventory levels.

The small spreads between European and US CX prices, along with weak demand, has provided little incentive to import large volumes from the US into Europe.

There is a consensus among market players that demand has been improving since April. One producer thinks that this was due to a stock build up by consumers in the wake of the adverse impact of the coronavirus.

Another factor which could have supported  CX demand is a rise in ordering activity and higher production levels in general resulting from an ease in lockdowns. According to the manufacturing purchasing managers’ index (PMI), Eurozone manufacturing increased in July.  Overall consumption is still much lower than 2019 levels.

European CX contracts for August have risen by €6/tonne from July on the back of an increase in upstream benzene prices. The monthly European CX contract price is calculated using the monthly benzene contract and the quarterly CX delta, which settled at a rollover in the third quarter. The rise in August contracts has had limited impact on CX demand.

A market player expects this upward trend in CX consumption to continue into September.

CX August contracts rose by 9% or 14 cents/gal from July with a rise in feedstock costs. The US CX contract price formula includes the monthly benzene contract and daily gas price. US benzene contracts FOB (free on board) USG (US Gulf) for August rose 15 cents/gal.

Natural gas prices were higher on 31 July up by $0.12/MMBtu compared to 30 June as the Henry Hub contract price on the NYMEX rose.

There are recent positive signs from the downstream sectors for the US CX market, with a steady improvement from the nylon market, assisted by stronger production.

July manufacturing levels were up according to PMI figures, marking a third consecutive month of growth. This included a rise in the chemical sector as orders have increased and due to an overall growth in the US economy.

The end user automotive sector also saw positive signs as domestic sales of light vehicles in July show a month on  month rise of 14%  based on figures from the US Bureau of Economic Analysis (BEA).

The downstream sectors for adipic acid, capro and nylon  are seeing a moderate rise in demand compared to a few months ago but still remain below pre-coronavirus pandemic levels.

Downstream demand for the Asian CX market has been impacted by reduced production levels for capro and adipic acid. August is normally a quiet period particularly for the capro markets in the region. Further down the chain, the nylon sector is noted to have high stock piles making buyers less inclined to making purchases, putting further pressure on CX demand.

CX is used in the production of intermediates of nylon 6 and 6,6, which are used in textiles, carpets and engineering plastics