Bullish CPL Market on the Tight Supply

Introduction: In H1 July, the Chinese caprolactam (CPL) market saw tight supply. However, the capacity growth has been the rapidest in 2017. What are the reasons for the tight supply?

First, CPL units in June took overhaul in turn and some unit were expected to restart in July. However, given the fine profits, some producers postponed their maintenance plan in June and the maintenance came in July. Operating rate in the CPL industry declined. As for the newly-built units, these units haven’t been put into normal operation.

Second, down stream users of CPL held bearish sentiments about the CPL market and didn’t purchase much goods. The inventories at some downstream users could be consumed for 1-2 months. However, the tight supply of CPL stimulated the users’ desire to buy.    

Third, as more and more accidents happened. Nation’s inspection on safety and environmental protection has become stricter than before. The CPL industry, which has high energy consumption, will be influenced by the environmental protection policy.

Finally, the shares of private enterprises are increasing, and the hype sentiments exist in the market.         

On the whole, the short supply in the CPL market will continue to exist. Moreover, July and August are the traditional off seasons. Therefore, the overall CPL market will be largely stable.