Introduction: Since May, the negative feedback from the demand side in the caprolactam market has continued to intensify, and the decline in upstream benzene prices has weakened cost support. Although caprolactam enterprises have continued to reduce operating rates, the support from production cuts is limited, and caprolactam prices have continued to decline.

The weak demand situation is unlikely to improve in the short term, and the downstream PA6 market continues to face pressure.

In May, PA6 market prices continued to decline. At the beginning of May, the price of regular spinning chip common supply in the East China market was 12,700-13,000 yuan/ton for cash short delivery. By May 22, the price had fallen to 12,000-12,200 yuan/ton for cash short delivery, a decrease of 750 yuan/ton, or 5.84%.

In May, the PA6 market fundamentals were relatively concentrated with bearish factors. The lack of improvement in demand continued to be a key factor dragging down chip market prices. Terminal sectors had insufficient order-taking capacity, with a shortage of new orders in domestic and foreign trade. Additionally, downstream players had a strong risk aversion, maintaining only basic rigid demand procurement of raw materials. The sales and inventory pressure in the PA6 chip segment remained high, and companies continuously cut chip prices to promote destocking. However, the pace of terminal procurement has not improved significantly, and the chip inventory destocking process has been slow.

According to statistics from Chempricehub, the average inventory of PA6 high-speed spinning chips is currently 17.5 days. High-speed spinning chips are partially traded under contracts, and spinning mills have relatively stable operations, so the inventory is relatively stable and currently maintains around the five-year average inventory level. The inventory pressure of PA6 regular spinning chips is more pronounced. Demand in fields such as engineering plastics and fishing nets remains weak, and downstream players have a bearish sentiment, lacking motivation for stocking up. They purchase raw materials in small quantities at low prices based on their own orders. Chip inventory is mainly concentrated at the production end, with PA6 regular spinning chip inventory currently at about 16.5 days, maintaining a high level.

Under weak demand conditions, the caprolactam and PA6 markets are mutually constrained. With the continuous decline in PA6 chip prices, the price gap between regular spinning chips and caprolactam for some integrated enterprises has narrowed or even temporarily reversed, exacerbating losses for single polymerization enterprises. They pressed down raw material procurement prices, and caprolactam prices fell below 12,000 yuan/ton. By May 22, the spot price of caprolactam in the East China market was 11,800-11,850 yuan/ton, delivered on acceptance.

Outlook: Looking ahead, on the demand side, the downstream PA6 market remains weak. There are no bright spots in terminal textile and engineering plastic demand, and PA6 chip inventory pressure is high. Moreover, with the price gap between PA6 chips and caprolactam continuously narrowing, the operating rate of PA6 polymerization is expected to remain low, and the intended price for raw material procurement may continue to decline. On the supply side, the spot supply of caprolactam is expected to increase slightly next week, as some previously shut-down units in Hebei plan to restart. The commodity supply pattern of caprolactam may remain relatively loose. On the cost side, the US-Iran peace talks continue to progress, further easing market concerns over crude oil supply risks, and crude oil and benzene prices may also trend lower. Overall, the caprolactam market is expected to remain weak in the short term, with continued supply-demand gaming, and caprolactam prices may continue to decline slightly.