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Insight | Time: Aug 28 2020 4:53PM
Some changes in China caprolactam import situation in 2020
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Viewing the caprolactam imports of China in the first seven months of 2020, the most direct impression is the evidently rising volume compared with the same period of last year. In January to July 2020, the accumulative CPL imports in China increased 28% year-on-year.

It is the comparatively low import prices that decide expanding import volume in the year. As large number of import arrivals come in to the ports, the tight supply of CPL in the second quarter of 2020 has been relieved evidently.

However, since the middle of the year, excessive imports begin to pressure on China domestic flake CPL trading apparently. In June-July particularly, some overseas suppliers have to dump some prompt port cargoes or arriving cargoes at discounted rates due to rising storage pressure, and this had burdened down imported CPL prices evidently.

Tracing the detailed import data of caprolactam in the first seven months of 2020, there are other changes.

Changes in import origins
Another direct reason for the increase in imported supply to Chinese mainland is the decline in demand in Taiwan. Part of the sources used to sell into Taiwan has been transferred to Chinese mainland. Comparing the volumes by import origin break-down in Jan-Jul 2020, we can see the apparent increase from South Korea and the United States. In Jan-July 2020, China’s CPL imports from South Korea and the United States totaled 12,273mt and 16,800mt respectively, as the number in the same period of 2019 only totaled 1,008mt and 0.

In addition, due to sluggish global demand and falling prices, the supply of some origins has stopped.

Changes in import terms of trade
Regarding the changes in import by terms of trade, the proportion of imports via the general trade has increased sharply from 16.6% in 2019 to 37.9% in Jan-Jul 2020. This is also in line with the point of view raised in the first part of this article—the low prices of imported CPL attract speculative replenishment of Chinese enterprises.

In Jan-Jul 2020, imported CPL price was as low as $900/mt, and on a RMB-based parity the VAT-included prices should be around 8,000/mt, and the RMB parity of imported price at $1,000/mt is below 9,000yuan/mt, which is no doubt very low levels.

As the recovery in Taiwan and other overseas markets may remain slow in a period of time, the rising import arrivals to Chinese mainland will continue. As a result, in a quite long period of time, China’s CPL flake market will be impacted and the prices will be pressured at lows. It is even possible to see prices of CPL flakes drop below CPL liquid prices in the fourth quarter of 2020.
[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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