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Insight | Time: Jun 29 2017 4:28PM
Nylon 66 chip market still with large downward space
 
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Nylon 66 chip prices, after declining continuously for 3 months, seemed cease dropping and even rebounded slightly within the week. Look on the supporting front, the first spur was from nylon 6 chip market, which has kept rising in May-Jun. With narrower price spread between nylon 66 and nylon 6 chip and continuous improving nylon 6 industry stimulated part of players’ activities. Second, as nylon 66 chip producers, represented by Invista Shanghai, insisted toughly upon the price lift after months of price cut. The one-way push from sellers stopped market temporarily from falling further. But, is it sustainable?



Based on below factors, It is hard to see a continuous rebound in Jul-Aug in nylon 66 chip section.
First, chip’s feedstock market, adipic acid and HMDA (mainly decided by butadiene) were under evident bearish mood. AA market had been weak for months as well, and an overall dull demand from almost all of its downstream products could still drag market downward.

Second, chip fundamentals were weak. Invista Shanghai had started production steadily, while the import volume of nylon 66 chip did not fall as many as expected. Market supply was still climbing up, though domestic producers, Anshan Guorui, Huafon, etc. had curbed their run rate rather low. And on end users’ side, demand was relatively steady, and under bearish market trend, traders’ transaction activities were low.

Furthermore, nylon 6 chip market might edge down slightly in the third quarter, as nylon 6 feedstock CPL’s supply was to increase in the third quarter of 2017, possibly to pressure down price modestly. It means that nylon 66 chip market could hardly get supportive force from nylon 6 industrial chain.

Above mentioned factors, along with a general acknowledged fact that demand in Jul and Aug would still be quiet and low, may come to the conclusion: nylon 66 chip market would still fall down in the coming two months.

But where is the bottom for nylon 66 market?





As nylon 66 chip downstream demand may probably be steadily low, the major influencing is from its upstream.

Price of adipic acid, one of the necessary feedstock making nylon 66 chip, has fallen to almost as low as the same period of 2016 in China domestic market. And butadiene, upstream of another feedstock of nylon 66 HMDA, keeps a similar rate with that in the past year. (As Chinese producers mainly use imported butadiene, here CFR China price is taken as a reference.) ADN market has no strong support like that in the past year (Invista U.S. suffered force majeure and stopped for a long term its ADN supply). Current HMDA prices are above 22,000yuan/mt, evidently higher than the price in the same period of last year, 16,000-17,000yuan/mt, while its direct feedstock ADN and butadiene are not performing better than last year. If no major production issues take plant in the coming 2 months, there are still around 2,000yuan/mt downward space for nylon 66 chip market, as it may only hit a solid bottom line around 17,000-17,500yuan/mt.
[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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