Nylon 6 CS chip surge: temporary rally or trend reversal?

Since early April, the nylon 6 conventional spinning (CS) chip market continued its slow downward trend. During the Labor Day holiday (May 1-5), international crude oil prices weakened due to OPEC's announcement of increased production, which subsequently dragged down domestic benzene prices. At the same time, the ongoing tensions in China-U.S. trade relations dampened market confidence in future exports and consumption, creating an overall bearish macroeconomic sentiment and putting widespread pressure on the chemical sector.

Amid multiple negative factors, market sentiment remained pessimistic. Downstream enterprises generally maintained low inventory operations, primarily replenishing stocks based on rigid demand, leading to a continuous decline in the spot market price of nylon 6 CS chips. In early May, the combined impact of falling benzene prices and sentiment-driven factors caused market prices to drop by up to 300yuan/mt in a single day, with little support for short-term price trends.

On May 12, China and the U.S. reached a phased easing agreement during talks in Geneva-China agreed to reduce tariffs on certain U.S. products from 125% to 10% within 90 days, while the U.S. simultaneously lowered tariffs on Chinese goods from 145% to 30%. The implementation of this policy directly triggered a rebound in global risk assets, with Brent crude futures rising by 2.57%, fully recovering the losses incurred after OPEC signaled increased production.

The rise in crude oil prices simultaneously drove a rebound in domestic benzene prices. More importantly, the market had widely expected benzene to maintain an inventory accumulation trend in the second quarter, leading to a large number of short positions being established in the futures market. However, the extent of this price rebound exceeded expectations, triggering a short squeeze. A wave of short-covering pushed up the spot price of benzene in East China by 300yuan/mt in a single day, a surge of 5.3%.

Nylon 6 CS chip market subsequently experienced sharp fluctuations. On May 12, spurred by sudden positive news, market participants showed clear divergence: some companies chose to halt sales and adopt a wait-and-see approach, while others seized the opportunity to accelerate shipments. Downstream factories, meanwhile, exhibited strong speculative purchasing intent. On that day, some major integrated nylon 6 chip producers reported single-day shipment volumes as high as nearly 10,000 tons, far exceeding the usual daily average.

Subsequently, while the upward momentum of benzene prices weakened, an unexpected maintenance shutdown at Hengli's 720kt/year styrene plant triggered a limit-up in the futures market, further fueling bullish sentiment across the industrial chain. Benzene prices continued to rise, driving synchronous upward adjustments in CPL and CS chip quotations. Mainstream market factories frequently adopted a "halt sales + price hike" strategy, pushing the price center steadily higher.

The sharp rise in CS chip prices this round is primarily driven by a confluence of multiple positive factors in the benzene market, including the rebound in crude oil prices, macro-policy tailwinds, and sentiment-driven short-covering. However, it is important to note:

1. From a fundamental supply-demand perspective, benzene market structure remains weak.

2. Downstream orders for CS chips are mostly concentrated in short-term speculative restocking.

3. The influence on CS chip downstream (mostly plastic, BCF, industrial filament and cord fabric) from the Sino-US tariff war is relatively small, so CS chip sales/production ratio is evidently better than nylon 6 HS (textile-grade) chip.

4. If macro or raw material support weakens subsequently, the sustainability of the price recovery will be constrained.

Therefore, while CS chip prices may have room for further short-term upward momentum, a sustained trend-driven recovery still faces significant resistance. Continued attention should be paid to crude oil trends, benzene market performance, and the actual absorption pace of downstream demand.