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Insight | Time: Mar 2 2021 3:39PM
Nylon 6 CS chip into intensive profit-taking sales
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Following the strong increase in caprolactam market, nylon 6 conventional spinning chip market has risen rapidly since China market reopened on Feb 18, 2021. In the week starting from Feb 22 and ending Feb 26, the quotation of medium-viscosity bright CS chips from mainstream factories has further elevated to 15,100yuan/mt, 6 months payment, delivered. The market seems have stabilized after hitting this height. The temporary stabilized CS chip is mainly due to the following factors.

First, the commodity market, including crude oil and international copper, has seen short-term adjustments, and there are divided point of views on market outlooks.

Second, nylon 6 CS chip plants who had been reluctant sellers began to sell after Sinopec settled its Feb contract.

Nylon 6 conventional spinning chip plants had sold stocks intensively before the Chinese Lunar New Year holiday. As CS chip plants mostly replenish CPL from term contract, their cost line is decided by Sinopec鈥檚 monthly contract settlement. And Sinopec had raised the Feb contract nomination dramatically to 13,100yuan/mt by Feb 23, a rate much higher than the expectation before the Chinese Lunar New Year holiday (Reasons for post-holiday CPL price hike are explained in insight report 鈥淐aprolactam finds some solid supports after a bullish start鈥. ) There comes the problem, chips sold before the CNY holiday was based on a lower cost of CPL, while actual monthly cost of CPL has been elevated significantly afterwards. Thus CS chip plants are suffering great losses.

The situation has not gone so bad as CS chip price quickly followed up after the CNY holiday. But considering CPL contract settlement for March is likely to be further higher, many CS chip plants are reluctant to sell chips, before Feb 23, when Sinopec settled the Feb contract at 12,600yuan/mt, 500yuan/mt lower than previous nomination price (13,100yuan/mt). The settlement rate has given CS chip plants some margin, which is important for polymer producer to balance their Feb account. And in this circumstances, CS chip plants have begun to sell actively at a profit-taking rate.

Third, traders have also begun to sell stocks intensively after Sinopec nailed the monthly cost. After the price for CS chip rose sharply, traders were more eager to liquidate stocks than plants, and their offers were lower than plants. Some traders in Yuyao and Wenzhou (Zhejiang) were dumping stocks heavily at 14,500yuan/mt on Feb 23-24, evidently lower than plants鈥 requirement. Traders鈥 heavy sales on lower-than-plant rates caused pressure on the overall CS chip market.

The above three points are the main reasons for the price consolidation of CS chips in the past week. Without a clear direction on crude oil and commodity market, it is expected that market mentality may extend and CS chip market may keep narrow range bound in short.

And with Sinopec released its March contract nomination at 13,800yuan/mt, and them closely rising to 14,200yuan/mt, the March settlement is expected to be close 14,000yuan/mt, which will keep CS chip offers firmly above 15,000yuan/mt, while traders may continue to offer lower at around 14,500-15,000yuan/mt. In this case, CPL contract nomination in the second week of March will be more critical to determine the direction for conventional spinning chip market.
[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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