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Insight | Time: May 22 2020 10:21AM
Recent nylon market brief analysis
 
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With the restart and stabilized production of Tianchen Yaolong’s 350kt/year caprolactam plant, supply shortage in South China and Zhejiang province had been basically released, and the tightness in Jiangsu and North China market was also eased to some extent.

After contacting with producers, delivery and operation of CPL plants had been mostly returned to normal pace, and almost no inventory was accumulated so far. Spot CPL price trend stabilized while kept a high status in the week recorded May 18-22.



Nylon 6 chip plants had cut down production accordingly when CPL supply was drained for a period of time. Operating rate of nylon 6 HS chip plants lowered from 67% to as low as 64% by May 20, and recovered to 66% by May 21; the run rate of CS chip plants dropped from 74% to 68% by May 21; the average run rate of nylon 6 chip plants in China lowered from 70.5% to as low as 66% by May 20 and returned to 67% by May 21.

But it is still doubtful whether chip plant run rate could be restored to above 70%. The dragging force is downstream demand. Downstream could not fully digest the quick price increase in previous two weeks, and when prices of HS chip rose to above 10,500yuan/mt by cash (or 11,000yuan/mt by 6 months payment), trading activities were evidently muted. As a result, nylon 6 chip plants may not ramp up their production further when CPL price stays above 9,500yuan/mt.



But a recent outside boost from crude oil market supported nylon 6 chip sales again. Trading of bright CS chip had been activated since May 19, and offers jumped up again. It is a firm support for CPL and nylon 6 chip sections as a whole.



As for nylon textile filament section, based on a comprehensive evaluation from inventory, plant operation and price, it is mainly in a healthy status but not to be described as bullish.



In the short term, market confidence is boosted by the news of the vaccine of COVID-19, coupled with higher crude oil prices based on the relatively ideal implementation of production reductions, nylon downstream market has expected a gradual higher trend in feedstock. Similar situation is also seen in other chemical market like PTA and polyethylene, as the price rise when market fundamentals have not been evidently improved. However, a firmer uptrend should be re-confirmed with downstream consumption recovery and order receiving. The slow resuming determines that there will not be significant increase in the industry yet, and prices may continue to wave in a range.
[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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