As the raw material caprolactam plummeted, PA6 slices in March “returned to before liberation overnight.” According to the monitored medium-viscosity slice sample data, as of March 31, PA6 plummeted by 6,800 yuan/ton compared with the same period last month, a decrease of 30.91%.
The quotations of medium-viscosity slices from mainstream polymerization plants in Jiangsu have dropped from around 21,500-22,000 yuan/ton to 14,500-15,500 yuan/ton. Most manufacturers do not offer external quotations and negotiate on a case-by-case basis.
The quotations in the domestic conventional spinning market are chaotic, with reference prices for the mid- to low-end range being 11,000-14,000 yuan/ton, and the mid- to high-end range being 14,000-16,000 yuan/ton; while high-speed spinning struggled to hold up prices in the first half of the month, and fell sharply in the second half, with the high-end range being 15,500-16,500 yuan/ton. Mid- to low-end 15,000-15,500 yuan/ton.
As prices plummeted, the operating rate of aggregation plants also shrank significantly that month, from 70% at the beginning of the month to less than 50% at the end of the month.
Except for Xinhui Meida and Fujian Jinjiang Technology, the operating rate remains above 60%. The operating rates of several major slicing plants in Jiangsu, such as Changan Polymer and Haiyang, are around 50%. Some smaller plants such as Hengtian China Fiber and Hongfu Most loads are less than 50%, and industry inventories are backlogged for about 10 days.
The direct cause of this month’s “roller coaster” market for slices is undoubtedly the plunge in the raw material caprolactam.
According to the monitored price trend of caprolactam, domestic caprolactam fell by more than 20% that month due to the drag of pure benzene. Sinopec lowered the listing price of caprolactam in March from 19,450 yuan/ton to 15,800 yuan/ton for three consecutive times in the middle of the month.
As the external U.S. dollar market fell simultaneously, by the end of March, the U.S. dollar quotation had dropped to 2,125 U.S. dollars per ton. The panic in the domestic market intensified, and it dropped by 1,000 yuan a day in the middle of the month.
As of the end of the month, the reference price for liquid material transactions has dropped to around 12,500-13,000 yuan/ton. As the profits of caprolactam are gradually compressed, the price is gradually approaching the cost line.
However, despite the continued decline in the domestic market, the operating rate of the caprolactam market remained high in March, causing inventories to continue to rise, which is also one of the reasons for the decline in market prices.
Entering April, some manufacturers in the market were undergoing maintenance, coupled with the strength of upstream pure benzene, the mentality of the downstream market improved slightly. After the Qingming Festival, the caprolactam market continued to rise tentatively, but the increase was small and slow due to the impact of inventory at chipping plants.
Overall, the supply and demand side of caprolactam has been eased, and link profits have gradually returned to rationality.
Of course, the deeper reason is the imbalance between supply and demand. Since the crazy surge in October 2016, the price of slices has reached a peak of around 22,000, and downstream resistance has been strong.
At the end of February, the slicing market was already “cold”. Downstream spinning or modification plants have reduced production on a large scale or used recycled materials for production. PA6 price reduction is imminent. However, the raw material caprolactam is still strong, making it difficult for slice prices to fall significantly.
Many polymerization factories are facing increasing sales pressure and can only solve the problem internally by reducing load or suspending production, which also puts pressure on the price of caprolactam.
Therefore, the caprolactam and chip market in March can only be described as “bleak”. In the words of industry insiders, “whatever goes up, will go down.”
However, with the deep price correction, the cost-effectiveness of nylon has gradually emerged, and the PA6 market mentality in April has greatly improved compared to the beginning of the month.
After the Qingming Festival holiday, the overall operating rate of the slicing industry has increased significantly. The main areas are concentrated in the low-end market in the north, and high-end products in East China are relatively weak. Due to the relatively thin profits of the industry as a whole, and the continued pressure on capital turnover caused by inventory inventory, the short-term market is still difficult to say optimistic.
Analysts believe that after May, caprolactam manufacturers resume maintenance and new devices come into operation, which will intensify the market crisis. Therefore, the impact from raw materials in April cannot be underestimated. However, the current chip market has reached a short-term bottom, and the supply and demand relationship has gradually returned to normal. In April, the market will mainly be moderately consolidated, or there may be a slight increase.
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