LONDON (GC Intelligence) — Europe nylon 6 and 66 (PA6/66) markets have been under even more pressure in August. There has been a gradual and rather steady decline in demand since the beginning of the year. And this current downtrend does not look like it is abating. In fact, all the recent indicators suggest further weakness.
Monthly auto sales, a major sector for nylon engineering resins, were again down. This situation should persist as car stocks remain reportedly high across Europe. The industrial sector is also following the same path as the automotive industry. And this weakness seems to be expanding in other segments which have been resilient up until now. For example, construction and electronic sectors are also suffering from the slowdown.
As PA66 demand slows further, availability is increasing. With margins still rather healthy, sellers are keen to sell as much as possible. And of course this is fuelling the downside.
As for PA6, the structural overcapacity is magnifying the current weakness. Caprolactam, the main feedstock is also characterised by ample supply. As such, sellers are not able to pass on the higher costs of benzene. At the same time, PA6 producers are seeing steady caprolactam costs but lower PA6 prices. As such, their margins are also shrinking.
As winter approaches, costs and some downstream market segments tend to slow down. Additionally, macroeconomic conditions point to further troubles ahead. It is clear that a rebound is not possible in the next few months. The best case scenario is the status quo and the worst outcome is now a global recession. On balance, further downward adjustments in prices and margins are forecast in Q4.