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Insight | Time:Oct 11 2017 11:53AM
CPL market to stay firm in Oct amid short supply
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The average operation rate of nylon 6 chip plants in Chinese mainland had lifted to 81% at present. Nylon 6 chip capacity was 3550kt/year in Chinese mainland, and if 1kt nylon 6 chips were produced with 1kt CPL, nylon 6 chip plants needed 2875kt CPL to produce chips at current operation rate. Only when all CPL plants were running at full capacity would CPL production meet the needs of chip plants. However, the average operation rate of CPL plants was 84% in Chinese mainland at present, which was not low, but CPL supply was still tight as the average operation rate of chip plants was high. Below was the operation rates of nylon 6 chip plants by Sep 30.

Nylon 6 chip plant Operation rate Nylon 6 chip plant Operation rate
Jinjian (including Zhongjin) Basically at full capacity Haiyang Basically at full capacity
Highsun (including Liheng) At slightly below 90% Hongsheng At around 90%
Meida Basically at full capacity Chang’an Polymer At 85%
Hengyi At slightly above 80% Yueyang Chemical At full capacity
Juheshun Basically at full capacity Jinbo At 80%

For inventory, the total CPL inventory of CPL and chip plants declined to a low level of 22kt (excluding CPL in transit). CPL plants only had a few safety stocks and had no spare stocks. Meanwhile, CPL inventory of chip plants was 2-2.5 days, and it would decrease further.

CPL capacity was smaller than nylon 6 chip capacity. CPL supply tightness mainly resulted from high chip plant operation rate, which was supported by strong demand from downstream nylon 6 filament, nylon 6 staple fiber and modified nylon markets.

For supply, CPL supply increase in Oct may mainly come from Yangquan and Nanjing Fibrant. Yangquan’s unit is still commissioning test run by Sep 30, so the supply may be limited in Oct. Nanjing Fibrant’s No.2 line has restarted, but cyclohexanone supply is tight and cyclohexanone prices are high, so the operation rate of Nanjing Fibrant’s units may stay at around 70%. Meanwhile, Risun has turnaround plan in Oct, and the restart time is much likely to be in end-Oct. Thus, CPL supply may increase limitedly in Oct.

For influences of the 19th National Congress on Oct 18, except for the turnaround plan of Risun’s unit and the unexpected short-term shutdown of Juhua’s unit, other plants are not heard to reduce or stop production, but transportation may be influenced evidently, so it is possible that some plants would shut down.

CPL demand may stay firm in Oct. Nylon 6 chip plants were running at high rates. Most large nylon 6 CS chip plants had oversold till mid-Oct, and chip plants basically had no inventory. Nylon 6 HS chip plants were mainly producing for contract cargos, and spot supply was short. Nylon 6 textile filament market was still tracking the increases, and filament inventory stayed at below 15 days.

As a whole, CPL market may stay firm in Oct amid tight sources and firm demand. But nylon 6 chip prices have been higher than 18,000yuan/mt, and speculative demand basically disappears. Besides, modified nylon plants show resistance at high chip prices. Thus, market participants are suggested to focus on the actual demand later.

*Note: HS- high-speed spinning
   CS- conventional spinning
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