Caprolactam maintains a high-level standoff, with the market under downward pressure.

Introduction: In September, rising pure benzene prices and earlier supply reductions jointly boosted the caprolactam market, pushing spot prices to a temporary peak. However, subsequent restarts of some units increased supply, while downstream terminal demand remained sluggish, hindering the pass-through of high-priced goods and causing the market to weaken and retreat. The market closed steadily before the National Day holiday. After the holiday, upstream pure benzene prices continued their upward trend, driving costs higher and further supporting caprolactam prices. Caprolactam prices followed suit with modest gains, but downstream follow-up purchases remained cautious. Consequently, the caprolactam market operated under pressure, continuing its oscillating and competitive trajectory.

Strong rise in raw material pure benzene; slow follow-up in caprolactam prices leads to shrinking profits

In September, escalating geopolitical conflicts between the US and Iran and restrictions on navigation through the Strait of Hormuz drove international crude oil prices above $100/barrel, rapidly lifting domestic pure benzene spot prices. Futures contracts repeatedly hit limit-up levels, creating a strong atmosphere of raw material price increases. Although geopolitical situations fluctuated later in the month, pure benzene maintained its overall high-level operation. By month-end, Sinopec raised its posted price for pure benzene to 10,200 CNY/ton. After the National Day holiday, the tight circulation pattern at pure benzene ports had not fundamentally changed. Some refineries implemented defensive load reductions due to concerns over feedstock availability and prioritizing fuel production over chemicals, resulting in supply recovery falling short of expectations. This continued to support pure benzene prices, which rose further as Sinopec adjusted its posted price to 10,600 CNY/ton.

Persistently high raw material costs provided rigid support for caprolactam prices. Following the National Day holiday, caprolactam prices also rose, with East China spot prices reaching 14,200 CNY/ton. However, excessively high raw material costs compressed corporate profits. Based on current Sinopec posted pure benzene prices and caprolactam prices, the spread between benzene and caprolactam narrowed to 3,600 CNY/ton, pushing caprolactam producers back into a loss-making position.

Supply-side operating rates recover; market supply becomes relatively loose

The caprolactam industry's operating rate in September showed a trend of starting low and then rising, resulting in an overall supply landscape that was looser than in August. At the beginning of the month, the Lunan Chemical unit shut down for maintenance on September 5, temporarily reducing market supply and supporting early-month price strength. However, several maintenance units restarted during the month, including Luxi Phase III and Yangmei Taihua Phase II, driving a continuous recovery in the industry's operating rate. The capacity utilization rate for caprolactam in September was 69.41%, a slight increase from August. Since October, caprolactam capacity utilization has continued to improve, currently standing at 71.55%. If no new maintenance shutdowns occur, the caprolactam supply landscape is expected to remain relatively loose.

Downstream demand follows cautiously; hindered pass-through remains a key constraint on price increases

Resistance to cost pass-through along the industrial chain increased progressively. Terminal demand from the spinning and textile industries remained flat, making it difficult for downstream enterprises to transfer high raw material costs further down the value chain. During the National Day holiday, many small and medium-sized weaving factories and some filament plants arranged shutdowns or rotating leave, causing the capacity utilization rate of the nylon filament industry to drop to around 67%. After the holiday, the operating load of the nylon filament industry generally maintained stability, with large-scale producers running smoothly and smaller firms adjusting loads based on needs. Enterprises primarily scheduled production flexibly according to orders and inventory, with no concentrated plans for resuming or increasing production currently. Post-holiday price increases in caprolactam and PA6 chips were not fully matched by the spinning sector, and recent price gains for high-speed spinning chips have been weak. Currently, East China market prices for PA6 conventional spinning chips have risen to 14,700–15,000 CNY/ton (cash, short delivery), while semi-dull chips for high-speed spinning are priced at 14,800–15,000 CNY/ton (acceptance, delivered). The price spread between chips and caprolactam remains at a low level.

Market Outlook

Looking ahead, the caprolactam market remains in a high-level standoff characterized by cost support from elevated raw material prices and weak downstream follow-up. On the cost front, high pure benzene prices established a high-cost environment for caprolactam in October. With caprolactam producers facing losses, their willingness to hold prices is strong, providing support for caprolactam prices. Regarding supply and demand, current operating rates suggest a relatively loose supply landscape for caprolactam, while terminal demand lacks significant improvement. Downstream polymerization and spinning segments are also experiencing losses, leading to continued caution in purchasing high-priced raw materials, which constrains potential price hikes for caprolactam. In the short term, the caprolactam market exhibits characteristics of high costs, high operating rates, weak demand, and low profits. The bidirectional tug-of-war between costs and demand remains the core theme of the market. The caprolactam market is currently in a dilemma, with prices likely to undergo minor oscillatory adjustments. Key factors to watch include changes in pure benzene prices on the cost side and whether production willingness among loss-making caprolactam enterprises diminishes, as these will influence future market dynamics.