Nylon 6
European nylon 6 August contract negotiations have begun, but are expected to be protracted, because market fundamentals are moving in opposing directions.
Producers are targeting price increases of €0.13/kg, because of a similar rise in the upstream August benzene price.
The European August benzene contract was agreed at €886/tonne, up €132/tonne from the previous month. A sizeable increase had been expected for August, as firming global markets and some short covering pushed domestic spot prices up by nearly $200/tonne over the course of July.
Nylon 6 buyers, though, are targeting a rollover because supply is easing and demand weakening.
Lower consumption is because of traditional end-user holiday outages in August, which are restricting buying interest.
Some players say that demand for August is weaker than is typical for the season, with shutdowns scheduled to last three-to-four weeks instead of the normal one-to-two. This is because fears over declining macroeconomic conditions – particularly in southern Europe, and the contagion effect of the Greek, Spanish and Portuguese debt crises – have led buyers to hold lower inventories and delay purchases until the outlook becomes clearer.
Other sources say that strong GDP growth in countries such as Germanyare counterbalancing weakening conditions in southern Europe. Most players say that it remains too early to predict demand in August. The majority of demand for downstream nylon 6 applications is heavily linked to GDP.
Nylon 6 availability is increasing because of the limited demand caused by holiday shutdowns.
Nylon 6 Production News
UBE Chemical Europe remains in force majeure on supplies of caprolactam. The company declared force majeure on 19 July because of problems with the restart of its 95,000 tonne/year Castellon plant in Spain after four weeks of planned maintenance, a company source previously confirmed. The company shut down the plant in May for planned maintenance, but has experienced difficulties in bringing it back on line ever since.
Unylon has shut down its 48,000 tonne/year nylon 6 plant in Guben, Germany, for planned maintenance, a company source previously confirmed. The outage began on 1 August and will last for one week. The shutdown has, so far, not had a large impact on the European supply/demand balance as it will coincide with August end-user holiday outages.
Nylon 6,6
European nylon 6,6 August contract prices are expected to settle at a rollover, because of balanced supply and demand, although negotiations are yet to begin in earnest.
Although, demand is decreasing because of traditional end-user outages in August, consumption remains firm on the back of strong automotive demand from Germany, which is being driven by strong GDP growth.
Because nylon 6,6 can be manufactured via two routes - either from adiponitrile via butadiene (BD), or adipic acid – the impact of the benzene August contract price increase (see nylon 6 section) will be more limited for nylon 6,6, allowing stable pricing during August.
The European BD monthly contract price (MCP) for August was agreed at €2,525/tonne FD NWE, up by €25/tonne from July. Availability has improved in July and demand has slowed in some areas as is traditional during the summer months. Although spot numbers have softened in July, there was still a wide gap between spot and contract prices, which indicated that the market was not under bearish pressure.
Nylon 6,6 Production News
RadiciGroup will shut down its 90,000 tonne/year nylon 6,6 (or polyamide 6,6) plant in Novara, Italy, in August for three weeks of planned maintenance, a source at the Italian petrochemical producer said on Tuesday.
The outage will begin on 8 August. The shutdown coincides with traditional end-user holiday outages in Europe, and is not expected to affect the overall European supply/demand balance.
Feedstocks
The caprolactam market remains because of supply issues - including UBE's force majeure at Castellon (see nylon 6 production news section).
Producers emphasised that short supply in Europe is likely to be exacerbated by rising demand from, and increasingly attractive prices in, Asia.
European demand is said to be relatively quiet in the textiles market, although engineering plastics continue to be quite strong, except for southern Europe. The slowdown in textiles is mainly due to the summer holidays lull but one buyer said its downstream customers were more reluctant than usual to commit themselves to orders for September and October.
The European adipic acid market is long. Substantial quantities of material are seen in the European arena from the USA, Asia and Ukraine. Buyers say it is the presence of the imports that accounts for the current length of the market. Some players are expecting exports to Asia to increase in August because of the traditional start of the downstream shoe sole sector. Players confirmed a substantial reduction in values in July. The buy side said this was a consequence of the volume of product available to converters. One buyer said consumers of adipic acid had been unable to secure price reductions on the back of previous drops in the benzene price when the balance of the adipic acid market had been less favourable but now this had been passed on to them because sellers needed to move material. Another commented that Chinese producers are also pushing product quite vigorously in the European market.
Attention has now turned to August adipic acid contract prices. A producer asserted that the combination of an improving Asian market and probable higher benzene prices would mean it will seek a price increase next month, although it said this is likely to be modest. Another producer was also targeting an increase, arguing that price falls in July would need to be compensated for in August.
($1=€0.70)
This week on ICIS ( www.icis.com ):
02/08/2011 09:54 Taiwan's FCFC starts up nylon chip plant in Vietnam
02/08/2011 09:18 Japan's Mitsubishi Gas first-quarter net profit up 82% to Y7.05bn
01/08/2011 12:04 Europe August phenol contract up €132/tonne on benzene increase
