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Insight | Time: Aug 14 2018 3:34PM
Relationship of current CPL plant operation rate and prices
 
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For the chart above, the yellow line shows the month-on-month change of CPL average price. If it is above zero, the price rises compared with the price in the last month, and if it is below zero, the price decreases compared with the price in the last months. The blue line shows the average operation rate of CPL plants.

When the average operation rate of CPL units was higher than 80%, the month-on-month change of CPL average price in the next month was negative, and the average CPL price in the next month fell.

Supply increased as the average operation rate lifted, so fundamentals turned weak. The chart above showed that the key turning point of the operation rate which changed demand-supply pattern and market trend was 80%. Capacity expansions of CPL and nylon 6 chip plants in the second half of 2018 were basically at the same time, so this rule also applied in a medium period of time.

In the third quarter of 2018, after mid-Aug, Hengyi’s 300kt/year CPL units would restart. Jiangsu Haili’s units would recover running at full capacity, and Tianchen Yaolong’s 350kt/year CPL unit would supply the market totally. Although Nanjing Fibrant’s running rate is 65% and Yangquan’s CPL units are not running at full capacity, the average operation rate of CPL units in Chinese mainland is sure to exceed 85%. Even if Risun’s unit shuts down later, the average operation rate is still above 80%. Therefore, CPL market may be influenced by high operation rate.


For demand and supply, several new nylon 6 chip units would start up in Aug, including 50kt/year of Hongsheng, 35kt/year of Sansuo and one or two lines of Luxi, so demand would rise moderately. But CPL inventory would accumulate slowly in Aug. Besides, nylon 6 HS chip plants are almost all running at full capacity, except for Jinjiang which could still lift operation rate, so demand increase is mainly for nylon 6 CS chips, but current CS chip prices are high, and chip plants do not tend to raise operation rates, so only when nylon 6 CS chip prices fall would buyers purchase more.

*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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