Can CPL situation improve in H2 2025?

A core view in the project of 2025 CPL situation at the end of 2024 was that, in terms of capacity structure, the gap between chip capacity and CPL capacity would widen in 2025, making the supply-demand dynamics relatively favorable for CPL. Based on this logic, downstream players initially actively participated in contract negotiations at the end of 2024, though a subsequent continuous price decline and weakening demand after the start of 2025 was another story.

This logic was not incorrect, but demand remained relatively sluggish in H1 2025, with chip factory operating rates falling more than expected. Additionally, CPL could not remain unscathed amid downstream price competition, leading to the bleak performance of CPL in H1 2025.

In 2024, PA6 plant operating rate hit a low of around 82% at the start of the year and peaked at 93%. In 2025, however, operating rates began to decline continuously after the Spring Festival, dropping to a low of 73%, then gradually recovering to 78% in Q2. Currently, they remain relatively stable.

Entering July, CPL plants that underwent maintenance shutdowns in Q2 gradually restarted, with operating rates rebounding to 92%. Based on capacity calculations, CPL supply slightly exceeded chip consumption, but considering a small portion of non-polymerization demand and some consumption in HMDA production (e.g., Yangnong Ruitai, Shenma), CPL supply and demand were basically balanced. Inventory monitoring also supported this conclusion: since July, CPL inventories have not been high; in fact, both buyers and sellers currently hold relatively low liquid inventories.

This serves as a baseline for speculating on the H2 CPL situation.

Since CPL currently faces no risk of inventory accumulation, attention should turn downstream to whether chip operating rates will decline further due to excessive pressure.

According to monitored chip factory inventories (equity), inventory figures have gradually approached the level seen in Q4 2024 as production cuts progressed. Based on our research and mainstream market views, downstream chip enterprises currently hold very low stocks. In other words, total inventories of chips are mainly concentrated in chip factories, with slow delivery. This inventory (pending delivery volume) accounts for an average of 7–10 days of chip production. Overall, the current chip inventory situation can barely be considered neutral.

Two other points to note are the historical low of absolute prices, the fact that CPL and chip processing fees have hit rock bottom and can fall no further, and the recent rebound in commodities driven by anti-involution policies. Combining these factors and judging PA6 factory operating rate decisions in Q3 based on current inventory levels, the author believes the current operating rate is likely the lowest in H2, and it can only rise rather than fall further.

Based on this, the author estimates CPL supply and demand using chip factory operating rates, with several possible scenarios for H2:

A. If chip operating rates gradually rise to 80–85% and CPL maintains restrained operation (operating rate not rising to 95%), CPL will gradually tighten.

B. If demand rebounds and downstream starts raw material stockpiling, with chip operating rates rising to 85–90%, CPL will likely remain tight.

C. If the average operating rate of the chip industry in H2 can reach over 90% as in 2024, CPL supply will fall short of demand, ushering in a bull market.

Assessing based on 2025 demand conditions, Scenario A is most likely in H2, Scenario B is possible, and conditions for Scenario C are not yet met.