Nylon filament sees improved transactions amid multiple positive factors

On May 12, the joint statement of the China-US economic and trade talks in Geneva noted that the United States would modify the ad valorem tariffs imposed on Chinese goods. Specifically, the 24% tariff would be suspended for an initial 90 days, while retaining the remaining 10% tariff on these goods as stipulated in the executive order; the tariffs imposed on these goods by the April 8-9 executive order would be canceled. In short, the US tariffs on Chinese goods this year were reduced from the previous 145% to 30%.

Upon the news, market confidence was boosted. However, downstream fabric factories initially remained cautious in purchasing nylon filaments without clear signs of increased orders. Over just two to three days, benzene prices surged by more than 600yuan/mt; driven by costs, CPL prices also gradually rose. Nylon 6 HS chip sellers were reluctant to sell at low prices, with effective transaction prices increasing by 200-400yuan/mt, and individual cases by 600yuan/mt. Driven by the dual positives of reduced Sino-US tariffs and strong raw material price increases for nylon, fabric factories gradually increased inquiries and purchases, and the long-dormant transaction volume of nylon filaments improved accordingly.

Starting from the afternoon of May 12th, a small number of filament factories saw increased order intake, with transaction prices remaining at previous low levels-some fabric factories even pressed for lower prices during procurement. On May 13th, fabric factories gradually increased inquiries and purchases of nylon filaments, mainly at low prices, and were resistant to price hikes. On May 14th, for nylon filament specifications with low processing fees, sellers appropriately raised quotations by 100-300yuan/mt (e.g., dull FDY 40D/7F) as buying interest increased. Only a small portion of goods saw transactions after the price increase, with most failing to advance.

Overall, filament factories experienced varying degrees of inventory reduction in recent days. Factories with better order intake reduced inventory by 7-12 days (i.e., orders received to cover production until the end of the month), while others only slightly reduced inventory based on production-sales balance. The industry's overall inventory level remained in the medium-to-high range. Filament prices remained stable, with significant resistance to price increases in transactions.

The current limited release of procurement demand from fabric factories can be attributed to the following reasons:

1. No obvious signs of increased orders at fabric mills: Although the 30% US tariff on Chinese goods represents a significant reduction, and some earlier orders have resumed shipping, the promotion of new order negotiations for fabric factories has not been apparent and requires time to validate. Additionally, the domestic sales market is entering the off-season, with orders at some fabric factories already decreasing seasonally.

2. High finished goods inventory at fabric factories: Fabric factories' finished goods inventory has been high since the beginning of the year. Over the past two to three months, domestic demand for products has lacked significant growth, and exports have been constrained. In some sectors, fabric factories have not only failed to reduce inventory during the traditional peak season but have even accumulated more inventory (e.g., the Wujiang water-jet spinning market). High inventory has limited fabric factories' purchasing enthusiasm.

3. Funding shortages: With high inventory tying up funds and the off-season approaching, fabric factories face both inventory accumulation pressure and tight liquidity, restricting their operational capacity to purchase raw materials.

4. Adequate raw material supply: Sustained new production capacity increases for nylon filaments have led to an abundance of low-priced goods in the market, with most specifications sufficiently supplied. This has reduced the urgency for fabric factories to stock up on raw materials at low prices.

In summary, the raw material price increases and reduced Sino-US tariffs have indeed boosted nylon filament transactions, with higher trading volumes last week. However, the impact has not been significant thus far: filament factories have not experienced explosive order growth, and price increases for filaments have faced resistance. The primary reason is that fabric factories themselves have not seen a clear increase in new orders, with only a gradual resumption of shipping for earlier orders. If raw materials continue to rise, it is expected to further drive nylon filament transactions, but the ultimate effect will depend on whether fabric factories' own order intake improves.