Will the CPL Market Continue to Increase in the Silver October?

The Chinese caprolactam (CPL) market entered traditional boom season from September. The CPL prices stopped decreasing and began to rebound at the beginning of this month. The liquid CPL prices were in the range of RMB 15,500-15,700/mt and the increasing rate was 15.55%. The CPL market recovered basically. Unsettled prices for CPL from Sinopec Group increased RMB 600/mt in total on September 15 and 19, which promoted the market.

Support from the upstream and downstream markets and decreasing supply were the major reasons for the up CPL market. Firstly, high benzene prices and booming Cyclohexanone market on the tight supply supported the production cost of CPL. Secondly, the supply of CPL was tight, as the operating rate in part of CPL factories decreased greatly because of limited supply of raw materials. Thirdly, the nylon industry entered the traditional boom season. The downstream factories increased operating rate and the demand for CPL increased. With these supportive factors mentioned above, the CPL market increased rapidly. The players were bullish about the CPL market. In the short term, the CPL market will continue to increase. However, as the downstream players will accept orders slowly and the supply of CPL will increase, there will be uncertainty in the market.

Production Cost 

From production cost side, the international benzene market continued rebounding which supported the market, while the Chinese market rebounded weakly. In the short term, the players will be bullish about the market. The supply of cyclohexanone will be tight which will support the CPL market. It is predicted that the cyclohexanone prices will increase greatly. In the short term, the support of production cost will be still modest.

CPL Supply

From the supply side, it is predicted that the supply will be increase, which will suppress the increasing CPL market. Yangmei Chemical increased operating rate of a 100kt/a CPL unit from September 9, and this unit can produce normal CPL from September 15. Zhejiang Juli increased the operating rate of a 100kt/a CPL unit to 80%-90%. One 200kt/a unit in Nanjing Orient restarted on September 22 and it will recover its supply next month. Recently, the supply of CPL will increase stably in Chinese market and the tight supply will release stably. 

Downstream Demand

The operating rate in weaving factories increased slightly and the demand for yarn increased stably. The nylon factories will increase operating rate marginally and the inventory will maintain in a low level. The demand for CPL was modest and the order was stable. However, as the CPL prices rose greatly, the profit from downstream factories decreased. Also, the downstream users showed resistance to the high prices and purchased on a need-to basis cautiously. It is predicted that the demand for CPL will be stable in the short term.

Forecast

Before the National Day, the downstream users stocked CPL actively. The Chinese CPL market will still increase. However, with the expectation of increasing supply, the supply will be weak. In the future, the increasing rate will be slow in Chinese CPL market. It is predicted that the Chinese CPL market will be hard to increase in October.