Introduction: Recently, the upstream pure benzene market has been affected by bearish factors such as weakening crude oil and downstream load reduction/production cuts, leading to volatile declines in pure benzene prices and weakening cost support for caprolactam. Combined with sustained weakness in caprolactam's own downstream demand, under the dominant constraints of bearish costs and demand, caprolactam prices continue to face downward pressure.

Pure Benzene Prices Fall, Weakening Cost and Confidence Support

After May, the pure benzene market became volatile and weak. Crude oil prices have retreated as geopolitical tensions have eased. Although port inventories of pure benzene are still destocking, overall inventory levels remain relatively high, and downstream products are struggling to follow the upward price movement, which dampens the procurement atmosphere for pure benzene. As downstream enterprises successively reduce loads and cut production, after replenishing raw material inventories on a small scale for just-in-time needs, their willingness to continue purchasing is low, leading to a weak downward trend in pure benzene market prices. Sinopec's pure benzene listing price was cut by 350 yuan/ton to 8,500 yuan/ton on May 8, and by another 200 yuan/ton to 8,300 yuan/ton on May 15. The spot price of pure benzene in the East China market is around 8,200 yuan/ton.

The consecutive decline in pure benzene prices has lowered caprolactam costs and has had a negative impact on the confidence of downstream and end-user players, making downstream raw material procurement more cautious and target prices lower.

Caprolactam Supply Begins to Decline, But Short-Term Supply Remains Relatively Loose

After the May Day holiday, caprolactam enterprises continued to reduce loads. Companies targeted a load factor of 70% for May and are now operating at reduced loads, bringing the overall caprolactam capacity utilization rate down to 69.41%. However, due to persistently weak demand, downstream PA6 chip producers are under significant sales pressure. Chip prices continue to fall, and the spread between PA6 chip and caprolactam prices is low, reducing polymerization production enthusiasm. The PA6 polymerization load has dropped to 63-64%. Some integrated enterprises in the north have also reduced their PA6 loads. Although supply has decreased somewhat, short-term salable caprolactam volumes are still relatively ample, and caprolactam inventories continue to rise. Market sales pressure persists, and recently the negotiation focus of caprolactam spot prices has also extended its downward trend. As of Friday, the East China market spot price of caprolactam is 11,900-12,000 yuan/ton (delivered with acceptance).

Demand Lacks Impetus for Improvement, PA6 Market Continues to Decline

The demand side has recently seen a persistent weak situation. End-use weaving operations are not at a high pace, and terminal order intake capacity is insufficient. There is a lack of new domestic and foreign trade orders, with only basic need-based replenishment maintained. For nylon filament, large-scale leading companies maintain high operating rates, while small and medium-sized factories have implemented flexible load reductions. The overall industry capacity utilization rate is temporarily stable, and market supply is ample. Meanwhile, factory inventories remain at high levels, downstream purchasing pace is slow, and inventory destocking is not smooth. For engineering plastics, downstream companies mainly follow small-lot need-based procurement. In the downward channel of raw material prices, downstream confidence is low, making raw material procurement even more cautious. PA6 chip inventories remain high. This week, PA6 regular spinning chip inventory was 16.5 days, and PA6 high-speed spinning chip inventory was 18 days.

The PA6 market fundamentals are bearish, and chip prices continue to decline. As of Friday, PA6 regular spinning chip prices were 12,300-12,600 yuan/ton (cash, short delivery), and PA6 high-speed spinning chip prices were 13,000-13,400 yuan/ton (delivered with acceptance).

Outlook

In the short term, fundamental support for the caprolactam market remains weak, and prices are expected to remain under pressure and slightly lower. Cost side: The pure benzene balance sheet is expected to continue destocking next week, but the extent of destocking will decrease. Downstream demand is declining, and after mid-month procurement, the focus will be on consuming existing inventory. Next week's market negotiation reference range is expected to be 7,900-8,200 yuan/ton. For the auxiliary material sulfur, due to factors such as tight supply and targeted supply guarantee diversion, resources are currently tilted mainly towards fertilizer enterprises, reducing supply to the chemical industry, and prices are high. The impact on caprolactam loads needs to be monitored later. Supply side: The overall load of caprolactam enterprises has dropped to around 70%, reducing short-term supply. However, some units in Hebei that were under maintenance are planned to restart in late May, which may increase spot supply. Demand side: The downstream PA6 operating load remains low recently, and the demand side lacks driving force for improvement. In summary, caprolactam fundamentals are expected to remain relatively weak in the short term, and caprolactam prices are expected to fluctuate within the range of 11,800-12,000 yuan/ton.