CPL stays firm on multiple supply issues

Since the beginning of November, CPL market in East China has been weakening due to the decline in crude oil and benzene prices and weaker supply and demand. Downstream nylon 6 chip transactions have also declined, as part of HS chip spot prices decreased. However, as of the middle of the month, we have found that the products in the nylon industry chain are relatively strong compared to benzene. Only the low-end HS chip has decreased slightly, while CPL and CS chip have remained stable or even slightly increased.

In fact, since the continuous decline in oil prices last week, CPL spot prices have also experienced a slight decrease. However, due to the unexpected shutdown of many CPL factories in North China recently, CPL supply has become tight, and spot prices rebounded slightly this week.

Relatively firm performance of CPL has provided certain price support to downstream chips. Moreover, the current spot inventory of chip is not high. In particular, the inventory of CS chip suppliers in the market is generally low, with certain amount of backorders even, so the prices have remained particularly strong.

As shown in the below chart, the inventory of HS chip has been at a low level for nearly half a year. With the increase in supply in the fourth quarter of 2023 combined with the weakening of low-end demand, there are signs of slow accumulation. 

On the contrary, CS chip inventory has been at a relatively high level from the first quarter to the third quarter, but it started to decrease rapidly at the end of the third quarter. It is currently at an absolute low level. Therefore, the price resistance has exceeded the expectations of the majority of the market, which is based on the understanding of the products in the first half of the year.

In the short term, in the case of overall low inventory of downstream chip market, attention should be paid to the recovery of several CPL plants under maintenance or lower-rate operation recently. If the recovery is timely, the tight supply situation may alleviate and the price may return to stability. If the operating rate remains low, hovering around 70%, it is not ruled out that CPL may experience a slight upward trend.