The two major forms of nylon (polyamide) virgin polymer are nylon 6, based on caprolactam (capro) and nylon 6,6, based on adipic acid, adiponitrile (via butadiene) and hexamethylene diamine (HMDA). Most nylon 6 production is used in the manufacture of clothing, carpets and engineering plastics for the automotive, electrical and electronics sectors. Nylon 6,6 is used predominantly for the engineering plastics sector.
The nylon 6 market has been estimated by market players as structurally oversupplied by around 200,000 tonnes/year. New capacity has come onstream in part to alleviate structural oversupply of capro in Europe.
Prior to the expansion of nylon 6 in Europe, the European capro market was structurally oversupplied by 300,000 tonnes/year. This structural oversupply was alleviated by exports to Asia, but Asia has now become self-sufficient in capro.
Despite several years of persistently weak margins and widespread talk of the need for consolidation, this did not occur. It is difficult to convince shareholders of the need to write off physical plant assets. And buyers are unlikely in such a long market.
Capro-producing companies have deep cash reserves and there are political factors restricting positive action. Instead, producers have attempted to move the structural oversupply downstream to the nylon 6 market.
Talk of the need for consolidation has now moved to the European nylon 6 market, with some players expecting capro to become tight again in 2016 because of the additional nylon 6 demand.
LANXESS brought online an additional 90,000 tonnes/year of nylon 6 virgin polymer capacity at Antwerp, Belgium, in July 2014. Poland’s Grupa Azoty outlined a six-year expansion strategy in September 2014 that will see it add an additional 60,000 tonnes/year of nylon 6 virgin polymer capacity and 30,000 tonnes/year of plastics composites production by 2020.
Automotive demand has been growing by around 5%/year as that market aims to further lighten the weight of vehicles.
Nylon 6 demand has also been boosted by the return to fashion of bulk continuous filament (BCF) carpets. Nylon 6,6 supply has remained broadly unchanged.
The spread between nylon 6 virgin polymer and upstream capro prices has fallen dramatically since the beginning of 2015 as extra capacity has come into the market and shifted the structural oversupply from the capro market to nylon 6. In January 2015, the spread between nylon and capro was €57-144/tonne. By March 2016, this had fallen to €34-54/tonne.
At the same time, the spread between nylon 6 and nylon 6,6 virgin polymer prices has more than doubled since September 2014, from €570-580/tonne, to €1,200-1,230/tonne.
As a result of these movements, nylon 6 producers have been under considerable pressure and are aiming to improve margins.
Nevertheless, the increased capacity means increased competition downstream. With buyers’ own pressure to improve profitability, this creates a natural divide in the market.
Coupled with this, the gap between nylon 6 and 6,6 virgin polymer prices is now seen as unsustainably wide. For the past few months, nylon 6,6 prices have been following nylon 6 movements to prevent any further widening of the spread.
Nylon 6 is made from reacting capro with water and a molecular mass regulator, such as ethanoic acid. These elements are poured into a reaction vessel and heated under nitrogen at 500°K (227°C). An intermediate, aminocaproic acid, is produced. The process then undergoes condensation to polymerise the molecules.
Most capro is produced from cyclohexane (CX), but it can also be made from phenol or toluene. CX is oxidised to cyclohexanone, then reacted with hydroxylamine sulphate to cyclohexanone oxime, followed by a Beckman rearrangement to yield capro. But this route also produces large volumes of ammonium sulphate (AS) and work is focused on reducing or eliminating the AS co-product.
For nylon 6,6 production, ADN is made from BD or propylene and then converted to HMDA. Then, HMDA is mixed with adipic acid, which is made from benzene, to form a salt. Ethanoic acid is mixed into a solution with the salt, and the mixture is heated to about 500°K. As pressure develops, the temperature is raised to 540°K, and the steam bled off. The pressure is reduced, and the polymer is extruded under nitrogen to yield a lace, which is then granulated.
Nylon demand is forecast by market players to grow at around 5%/year in the mid-term because of growth from the automotive sector. Nevertheless, the demand growth has been insufficient to overturn the growth in capacity and margins are expected to remain under pressure.
The nylon 6 market continues to call for consolidation, but with no obvious candidates to exit the market.
The shift from oversupply of capro to oversupply of nylon 6 in Europe allows producers to further integrate and reposition themselves higher up the value chain.
Increasingly the battle for market share will come down to players positioning themselves as the technical supplier of choice. And it means that they can become increasingly specialised in their manufacturing process, locking individual customers into their ecosystem.
Nylon 6,6 supply and demand are expected to remain broadly balanced in the near-to-mid-term.