Lead-in: Before the National Day holiday, the caprolactam market stabilized after a decline. At month-end, upstream pure benzene prices continued to rise, keeping cost pressures high for caprolactam producers. However, the supply landscape loosened, and downstream procurement pace slowed, causing the market to consolidate under pressure. Looking ahead to the post-holiday period, crude oil and pure benzene trends remain key variables. With pure benzene prices staying elevated, caprolactam enterprises are facing deepening losses, while downstream resistance to high prices limits follow-through. The post-holiday caprolactam market is likely to continue operating in a tug-of-war between cost support and weak demand.
Pure Benzene Prices Continue to Climb, Keeping Cost Pressures High
The pure benzene market fluctuated upward throughout September. Early in the month, escalating tensions between the U.S. and Iran led to a sharp drop in traffic through the Strait of Hormuz. Crude oil prices broke through $100 per barrel, triggering a rapid rally in pure benzene spot prices, with futures repeatedly hitting their daily limit-up. Later in the month, signals of peace negotiations emerged, causing geopolitical premiums to retreat and prices to pull back from highs. On the supply side, although several units undergoing maintenance gradually restarted, operating rates rose less than expected due to feedstock shortages, and import arrivals were also constrained. As the month-end delivery window approached, port inventories remained at extremely low levels. A concentrated buy-back of short positions drove a significant surge in spot prices; however, far-month contracts lacked momentum to follow suit, widening the spread between October-late delivery negotiations and spot prices to over 1,500 RMB/ton. By the end of September, Sinopec raised its listed price for pure benzene to 10,200 RMB/ton, setting a high-cost baseline for caprolactam production in October.
Caprolactam Supply Landscape Loosens, Constraining Prices
In September, the capacity utilization rate for caprolactam increased slightly to 69.41%. Regarding plant operations: Lunan Chemical shut down for approximately 50 days starting September 5; Luxi Phase III restarted; and Yangmei Taihua Phase II resumed operation by month-end. These factors contributed to an overall increase in capacity utilization and higher spot availability in the market. Additionally, downstream polyamide-6 (PA6) chip markets showed weak follow-through on price increases, with polymerization plants maintaining low operating loads. Consequently, the caprolactam supply landscape loosened in late September, leading to a pullback in market prices from highs. Downstream polymerization procurement slowed further, resulting in inventory buildup that placed downward pressure on prices.
With the restart of the Yangmei Taihua unit near month-end, caprolactam capacity utilization rose to 71.64%. Based on current operating rates, October caprolactam output is projected to increase to approximately 560,000 tons. Assuming no additional new production cuts later, the supply landscape for caprolactam in October will remain loose.
Downstream PA6 Operating Rates Remain Cautious, Demand Momentum Weak
Total consumption of caprolactam in September decreased month-over-month. Domestic downstream consumption reached 514,600 tons, a reduction of 13,000 tons or 2.46% compared to August. Overall operating rates for downstream PA6 hovered around 60%-62%. Resistance to passing on high raw material costs increased as one moved further down the value chain. Polymerization enterprises maintained a slow procurement pace, creating bearish pressure on the caprolactam market from the demand side.
Market Outlook
Costs: Sinopec’s listed pure benzene price was raised to 10,200 RMB/ton at the end of September, setting a high starting point for October contract prices. The average cost of caprolactam in October is expected to rise further compared to September, placing significant pressure on producers. Calculated using current caprolactam delivered spot prices and Sinopec’s listed pure benzene price, the benzene-caprolactam spread has narrowed to 3,600 RMB/ton. Caprolactam enterprises are expected to fall into loss-making territory in October and may maintain strong intentions to hold prices steady.
Supply: Caprolactam capacity utilization has recovered somewhat. Based on current operating rates, the supply landscape in October remains loose, implying continued sales pressure from the supply side and a bearish impact on prices. However, since enterprise losses are expected to worsen in October, this may dampen enthusiasm for maintaining high operating rates in the subsequent period.
Demand: The demand side remains predominantly cautious. Nylon filament spinning segments reduced load and cut production during the holiday. Overall sentiment is conservative, limiting the ability to absorb higher prices.
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