Boosted by the sharp rise in crude oil and bulk commodities, the excessive increase of raw materials has quickly flooded the textile industrial. Since the first working day after the CNY holiday, caprolactam spot had jumped up by around 2,400yuan/mt and nylon 6 high-speed spinning chip spot rose by 2,000yuan/mt in the first 10 trading days after holiday.
Before holiday, as industrial players had expected the market to be in mild increase or even slight fall after the market reopening, many plants had oversold their stocks. Some plants had their backorders queued up to at least end-Feb, and some to mid-Mar, and even backorders were to the end of Mar or early Apr. The more backorders they took before the holiday, the larger the losses are.
The above chart shows that nylon 6 POY 86Dtex and nylon 6 semi-dull HS chip price spread has lowered 350yuan/mt or 18.9% from Feb 25 to Mar 1, a time span across the CNY holiday. This means POY profit, based on the hand-to-mouth purchasing of HS chip spot, is 350yuan/mt lower than the pre-holiday level. According to market survey, most POY plants are under deficits.
In late Jan to early Feb, most NFY plants had no intension to replenish large number of HS chip, which had been in a flat trend sufficient supply. Right before the CNY holiday, nylon 6 HS chip prices gradually elevated in line with CPL spot, but most HS chips are ordained to contract buyers, and spot supply was rather limited. NFY plants were willing to replenish at this time, but could not secure much feedstock from the spot, and only acquired the monthly contracted volume to the up limit.
According to plant survey, only some small-scale and very few medium-scale NFY plants had prepared 1-2 months feedstock, while most large-scale NFY plants are now under immense cost pressure.
Under the global inflation, market players have become less certain on their judgment of market ceiling price. The development is out of the fundamentals. For nylon 6 textile filament plants, the upmost task in Mar is to control the risks of losses and risks of high-cost inventory accumulation.
The sustainability of this round of quick rise is still uncertain, but most players expect price to continue to be high in short. NFY plants should adjust the expectation of CPL contract settlement for Mar and adjust NFY prices accordingly.
Post time: Mar-15-2021