Asia caprolactam may halt uptrend in August on longer supply

SINGAPORE (ICIS)–Caprolactam’s price uptrend in Asia may fizzle out in August as tight supply will ease down in the key China market, with new capacities coming on stream, industry sources said.    

Prices have been rising since June, backed by gains in China’s domestic market due to tight cargo availability as local plants ran at a reduced average run rate of below 70%.

“Domestic spot prices are still trending up slightly, at stable-to-firmer levels. But this may only last till early August, depending on whether the new outputs can come on [stream] smoothly,” a capro buyer said.

Capro discussions are currently at $1,700-1,750/tonne CFR (cost and freight) China.

Spot regional capro weekly prices were assessed on 19 July at $1,650-1,700/tonne CFR China, up by around 12% from early June, ICIS data showed.

Chinese domestic prices of the material, on the other hand, increased at a faster rate of about 20% from early June to nearly yuan (CNY) 15,000/tonne ($2,222/tonne) ex-works on 21 July, market sources said.

Sinopec – a key Chinese capro supplier – on 24 July settled its July domestic contract price at a higher prices of CNY14,500/tonne (EXW) ex-works, up by CNY1,350/tonne from June.

Supply is expected to grow in the near term with new Chinese capro plants scheduled to start commercial production in the third quarter, including the 400,000 tonne/year plant operated by Fujian Shenyuan New Materials Co and the 200,000 tonne/year unit of Yangmei Chemical Co.

“It is uncertain as to how long the tight supply can persist, which would depend on whether new spot material come out as planned,” a capro trader said.

Fujian Shenyuan is said to have started its new caprolactam plant late last week, but sources said that it would take time before the actual output is released into the market.

Meanwhile, Yangmei Chemical Co is targeting to start production at its new plant by end of July, according to market sources.

The companies could not be reached for an official comment at the time of reporting.  

In the main downstream nylon sector, the average demand was described as moderate and could also limit any further gains in capro prices, other market sources said.

“Nylon makers are trying to catch up with capro prices, but whether we can catch up is a question. Demand is not too bad, but not too good either,” a Taiwanese capro buyer said.

A Chinese nylon maker said: “The gap between domestic prices and USD prices [for caprolactam] are pulled very closely together now, but downstream nylon is following very cautiously.”

“In my view, the uptrend can, at most, last for a month more,” he added.

Meanwhile, most nylon makers said that they have stopped offering nylon chip cargoes to China this week, preferring to take a wait-and-see stance on the market amid the uncertainties.

Caprolactam is used in the production of nylon 6 fibres, which are in turned applied in textile, carpet and industrial yarn manufacturing.

Focus article by Jeslyn Lerh

($1 = CNY6.75)

Pictured above: Caprolactam is used in the production of nylon. (Source: Fotex/REX/Shutterstock)