Asia capro gains may be capped; downstream nylon still weak

By Daphne Ho

SINGAPORE (ICIS)–Spot caprolactam prices in China may not be able to sustain recent gains, with the key downstream nylon sector weakening as overall consumption of textile goods declined amid a slowing Chinese economy, market sources said on Monday.

On 21 August, capro prices were assessed stable week on week at $2,330-2,355/tonne (€1,748-1,766/tonne) CFR (cost and freight) China, after having risen by $40-50/tonne from end-July, according to ICIS.

Tightening supply helped drive up prices in recent weeks as domestic capro facilities are operating at reduced rates, averaging 68%, industry sources said.

In Zhejiang province, Baling Hengyi’s 200,000 tonne/year capro plant at Hangzhou is running at 85% of capacity because of a power shortage, according to a company source.

In Hunan province, on the other hand, Baling Petrochemical’s 130,000 tonne/year capro line at Yueyang city has been shut since early July, with no restart date specified.

The company has two other capro lines with a combined capacity of 170,000 tonne/year that are operating at 55% of capacity, a company source said.

Aggravating the tight supply in the Chinese market is the reduction in import volumes amid plant shutdowns in Belarus and Russia this month, industry sources said.

Grodno’s 140,000 tonne/year capro unit in Belarus is undergoing turnaround that is expected to last a month from early August. The company is exports around 60,000 tonnes/year of capro, according to a source close to the company.

In Russia, SBU Azot’s 116,000 tonne/year capro plant in Kemerovo had a nine-day shutdown and was restarted on 14 August. Until mid-week, the producer has not produced enough spot materials to sell to the Chinese market.

“We do not have sufficient spot availability to allocate to the Chinese market,” another Russian producer said.

But market players do not expect capro prices in Asia to continue their uptrend.

“Even though benzene prices are firming, further price increases will be hard to achieve with downstream market sentiments weakening,” a producer said.

Capro’s main downstream market has stayed weak, with nylon chips prices fallen by $30/tonne over the past two weeks to $2,630-2,650/tonne CFR China, according to ICIS.

Buyers are cautious about making long-term purchases as macroeconomic conditions in China has yet to improve, market sources said.

In 2012, the Chinese economy posted a 7.8% growth – its weakest in 13 years – with the pace of expansion continuing to slow down this year.

In the week ended 21 August, majority of capro market participants have retreated to the sidelines, having procured sufficient materials to cover their September requirements, industry sources said.

Additional reporting by Angeline Zhang

($1 = €0.75)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections