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Insight | Time: Mar 14 2017 10:32AM
Nylon market slumps amid bearish upstream and downstream markets
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Supported by rising CPL contract prices, nylon market has surged again after Spring Festival, but the market stops rising from mid-late Feb. Then, CPL and nylon 6 CS chip prices turn bearish, and prices have dropped almost 1000yuan/mt from the highest level on Feb 21.

CPL supply has lengthened instead of being tight.

The operation rate of CPL plants has increased rapidly on the back of high CPL profits after Spring Festival, though high-end contract CPL has been tight owing to shutdowns of Nanjing Chemical’s cyclohexanone unit, which supplies cyclohexanone for DSM Fibrant (DSM Nanjing originally), and Sinopec’s CPL unit at the beginning of Feb. Shandong Fangming’s 100kt/year unit and Nanjing Chemical’s cyclohexanone unit has restarted, and the operation rate of DSM Fibrant’s two units has gone up. Most CPL units are running at full capacity, and several high at 80-90%, so CPL supply has lengthened instead of being tight. Affected by falling benzene prices after Spring Festival, buyers are mainly on the sidelines in CPL market, and trading is in a dull sentiment, with only a few purchases for rigid demand. Inventory of CPL plants increase due to poor sales, and several plants have reduced production.

Time is needed for end-users market to track the price increases and consume previous stocks.

For downstream plants, end-users weaving plants start up gradually, and the operation rate is not low, but demand for nylon 6 filament is not good. There are few new orders for most nylon 6 filament plants, and plants are mostly producing for previous orders.

There are three reasons for weak end-users demand. Firstly, Nylon market has surged rapidly before Spring Festival, so the market has been expected to increase, so downstream plants have restocked a large quantity of feedstock. But the market turns bearish now, and plants with less stocks expect a falling market, so they purchase in a weak sentiment, with flat demand.

Secondly, it is hard for buyers to track the increases in time. Feedstock prices rise rapidly, but prices for finished products rise slowly.

Thirdly, textile feedstocks are alternative, and nylon demand decreases when prices are high. Compared with polyester, viscose and cotton, nylon prices are high and price increases are the largest during the surging market after Nov 2016, which influences weaving plants’ demand for nylon.

Textile filament plants and weaving plants could keep running at full capacity until mid-late Mar or later with the stocks for chips and nylon 6 filament respectively at present, and during this period of time nylon market would went down, which would provide some time for end-users market to track the price increases and balance the benefits between upstream market and downstream market.

As a whole, affected by bearish feedstock prices and weak downstream demand, nylon market is expected to fall, and price-drops may be influenced by changes of feedstock units and weaving plants’ follow-up of prices and consumption of stocks.

*Note: HS- high-speed spinning
    CS- conventional spinning
[RISK DISCLAIMER] All opinions, news, analysis, prices or other information contained on this report is provided by analyst of Zhejiang Huarui Information Consulting Co., Ltd (CCFGroup) as general market commentary and does not constitute investment advice. CCFGroup will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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