Nylon 66 market may keep strong after the CNY holiday

As the first month of 2024 is coming to an end, nylon 66 chip market is also nearing the end of pre-holiday stocking. Downstream buyers mainly have concentrated their purchases in the last two weeks of January, with contract delivery and sporadic replenishments being the main focus in early February. Transaction volume has weakened. The market concern comes to that whether nylon 66 market will have a good start after the Chinese New Year? We will mainly analyze from the following points:

1. Supply and demand

During the Chinese New Year holiday, there are not many maintenance plans currently. Huayang's entire production line will be shut down for 7-10 days during the holiday. Huafon's facilities will start rotating maintenance at the end of February, with one line being shut down in both Wenzhou (40kt/year*2) and Chongqing (40/50/60kt/year) plants. Other nylon 66 factories do not have planned maintenance.

After the holiday, Ruitai in Ningxia plans to commence a new 20kt/year production line. Tianchen is expected to gradually restart the production of HMDA and chip facilities after the CNY holiday, and it is estimated that chip supply can resume after March.

Therefore, based on the current plans, the chip supply is expected to increase after the holiday, but these are the changes in existing facilities. The earliest new capacities are expected to form effective supply in April.

Demand may be mainly steady. Considering the average performance of nylon 66 market in 2023, the pre-holiday restocking and speculative atmosphere are weak, so downstream factories will only replenish stocks until the end of February. Therefore, there will still be replenishment demand after the Lantern Festival (Feb 24).

2. Cost reference

HMDA: The Invista Shanghai continued to raise its Feb contract nomination of HMDA to 22,500yuan/mt. In addition, the supply shortage of adiponitrile and HMDA is difficult to ease in the first quarter of 2024. Even if Tianchen can successfully restart the production of HMDA after the Chinese New Year, the short-term impact on the market will be limited. In addition, the current prices of caprolactam and adipic acid are not low, and under the influence of strong benzene prices, the prices of these two products may continue to rise in the first quarter. Currently, the production costs for caprolactam and adipic acid-based HMDA have reached 20,000-21,000yuan/mt, and they are expected to continue to rise in the future. Therefore, China domestic factories do not expect to lower the prices of HMDA.

AA: The processing margin of adipic acid has returned to about 2,000-2,200yuan/mt. Though AA plants' losses have decreased, it is hard to reclaim profit. With the expectation of continued price rise in benzene, the 10,000yuan/mt price for AA is still a low level. It is expected that adipic acid will experience overall strength after the Chinese New Year.

Therefore, it is quite evident to expect rising cost of nylon 66, and factories have taken this into consideration. Pre-holiday quotations have started to increase by about 500yuan/mt, with mainstream factories quoting above 21,500-22,000yuan/mt, and small and medium-sized polymer factories have also raised their quotations to around 20,500-21,000yuan/mt. However, considering that pre-holiday stocking has basically ended and downstream actual follow-up is limited, it provides a condition for upward adjustment after the holiday.

3. Trends of related products

Currently, the mainstream price difference between nylon 66 and nylon 6 is 5,350yuan/mt in early February, and the narrowing price difference is beneficial to the growth of demand for nylon 66 in downstream modified plastic market. Moreover, nylon 6 market has a good sales situation, and pre-sales for the Chinese New Year have been smooth. It is expected that after the holiday, there will be a resonant upward trend between nylon 6 and 66 market. Moreover, As nylon 6 chip market outlook is strong, there will be a good momentum for nylon 66 to continue rising after the holiday

From a macro perspective, the tense situation in the Middle East has pushed up oil prices in the short term, while major China domestic chemical products have reached the resistance level. Looking at the futures market, there is still significant upward pressure before the CNY holiday. However, considering the uncertainty factor of oil prices, the probability of volatile upward movement before and after the holiday is relatively high.

Considering the above factors, there is a considerable possibility for nylon 66 to rise after the CNY holiday.