PA6 capacity exceeds 80 million tons: how is the market supply and demand?

In September 2025, Yuehua New Materials has commenced the production of a new 75,000 tons/year PA6 line, and Guangxi Hengyi also started feeding another new unit. The total nylon 6 production capacity in Chinese mainland has surpassed the 80 million tons/year, moving closer to the 10-million-ton level. While the momentum of capacity growth remains strong, demand growth has been weak this year, and the pressure from the supply-demand imbalance has manifested in many aspects.

1. 2025 new capacity are far lower than last year, but effective capacity release is significant.

Since the beginning of 2025, new PA6 capacity has totaled 400,000 tons per year, including 225,000 tons of HS chip and 175,000 tons of CS chip. In terms of capacity increment, this is far lower than the 1.52 million tons of new capacity in 2024. However, 840,000 tons of last year's new capacity came online between September and December, and this portion has been fully and effectively released this year, leading to a significant increase in the effective supply of PA6.

There is also substantial expansion in downstream textile filament production in 2025, which, in theory, should match the surge in PA6 supply. However, the demand for textile filament lacks support from significant new product demand, leading to evident oversupply in filament. Starting mid-2025, filament producers gradually reduced production due to losses and high inventory pressure, and the pace of new capacity commissioning slowed down, resulting in a trend toward oversupply of HS chip as well. The supply-demand balance for CS chip is slightly better, with relatively steady downstream demand growth. However, demand growth still falls short of supply growth, leading to a looser supply of CS chip. Speculative demand from downstream users has also decreased noticeably compared to previous years.

2. HS chip plants' run rates have declined more significantly compared to last year.

Due to supply growth outpacing demand growth and the pressure of oversupply, PA6 operating rates have also declined compared to last year. By product type, the decline in HS chip plants' operating rates is more pronounced, with the average rate in the first three quarters down by 15% compared to last year's annual average. CS chip plants' operating rates fell by 3% year-on-year, a noticeably smaller decline than that of HS chip, indicating that HS chip is more oversupplied than CS chip this year.

3. Industry inventory levels are higher than last year.

Oversupply has led to a significant increase in inventory at polymerization plants. In the first three quarters, the average inventory for HS chip was 7 days higher than last year's annual average, while CS chip inventory was 4 days higher. Breaking it down by product, the inventory pressure for HS chip is mainly concentrated in dull-grade HS chip, while semi-dull HS chip inventory is relatively better. This is primarily because demand growth for coarse-denier dull products has been modest this year, while supply increases have exacerbated the imbalance.

Additionally, at the individual enterprise level, there are variations in inventory levels among chip producers. It is quite common for chip producers to hold 15-20 days of inventory, with some maintaining lower levels of under 10 days.

4. Processing margins have been compressed across the board.

Intensified market competition due to oversupply has led to a significant decline in chip processing margins. In the first three quarters, the average processing margin for semi-dull HS chip decreased by 450yuan/mt year-on-year, while medium-viscosity bright CS chip fell by 320yuan/mt. The compression in HS chip processing margins has been greater than that of CS chip.

Moreover, the decline in processing margins for dull HS chip has been the most pronounced, with spot processing margins generally down by 500-600yuan/mt compared to last year. In some cases, spot processing margins temporarily dropped to as low as 1,100-1,200yuan/mt (based on spot CPL as the cost reference), only 200-300yuan/mt higher than semi-dull HS chip processing margins.

Based on recent processing margins, spot chip prices are generally loss-making. Contract processing margins for HS chip have become nominal, largely aligning with spot processing margins.

In summary, while new PA6 chip capacity this year have been limited, the actual release of supply has been substantial. Demand growth in the previously strong textile-grade market has slowed significantly, leading to a clear oversupply of HS chip and a sharp compression of margins into loss-making territory. In comparison, the supply-demand balance for CS chip is slightly better than that of HS chip, with operating rates, inventory levels, and processing margin compression also relatively better. With new units still slated for commissioning in the fourth quarter and no foreseeable positive support on the demand side, the supply-demand pressure for PA6 chip is expected to continue rising.