Why are adipic acid producers in China facing negative margins despite strong downstream growth?

Recent data shows Chinese adipic acid producers are losing roughly 2,300 yuan per tonne, with operating rates at only 65%. The culprit is the upstream benzene chain: pure benzene prices have surged due to low inventories and geopolitical supply disruptions, while adipic acid prices have failed to keep pace because downstream sectors like nylon 66 and polyurethane are themselves weak. This margin squeeze is typical of the aromatics chain, where upstream suppliers capture most of the value. However, the situation is expected to improve as new downstream capacity in nylon 66 and PBAT comes online in 2023-2024, and as high-cost European capacity exits. Producers with integrated benzene-to-adipic acid chains, like Hualu Hengsheng, are better positioned to weather the trough.