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PA66/6: POSSIBLE SCENARIOS FOR 2H 2019

August 9, 2019

London (GC Intelligence) — As the markets head toward the latter part of 2019, an even weaker period is the most plausible scenario. With worsening car sales and ongoing macroeconomic slowdowns, the outlook is looking scary.

The current GC Intelligence’s price forecasts reflect this weak environment. What is more, the latest macro and automotive data make for a bleak reading. As such, there is room for more downside and a recovery in 2020 is now at risk.

The forecast assumes that the tariff disputes will continue to prevent a rebound. There will also be pressure during the second half of this year because of a seasonal slowdown. Raw material prices and some sectors tend to ease during the autumn and winter months. And a broader weak macroeconomic environment should ensure a slow start in 2020.

A worst-case scenario would see a further reduction in prices and margins for both PA6 and PA66. Demand after the summer in key sectors does not pick up and becomes worse. Worries of a recession will start to reach consumers which will start to slow down spending. The automotive industry continues to suffer from the tariff disputes. Brexit turns out to be a disaster and has a negative impact on the economy and the automotive sector. These developments increase the likelihood of a recession in 2020.

An alternative scenario would see better demand and slight rebound in prices. The automotive sector manages to run down stocks and production picks up again. At the same time, deferred investments increase as the market adjusts to the new normal. Ample availability in PA6, and to some extent PA66, ends and balance returns.

Also, if demand is strong, PA66 prices could spike again during Q4. This is because there is a major scheduled plant shutdown in France. Butachimie has plans to update the only adiponitrile (ADN) plant in Europe during this time. And if there are production glitches, there could be a return to the 2017 and 2018 dynamics. This is because PA66 market globally suffers from structural tightness. Several production issues in the past amid good demand resulted in severe shortages. This led to prices gaining over €1000/mt. While another spike is the least likely scenario, it remains a plausible one.

In summary, during the summer is always difficult to read the markets. But it is also true that there have been no signs of a likely rebound. In fact, the opposite is true. As such, it is more likely than not that the markets will remain weak for the rest of the year and in 2020.

Note: For price levels, forecasts, and a more in-depth analysis take a look at the GC INTELLIGENCE® Market Reports…→

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