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Insight | Time:Dec 27 2016 9:37AM
The actual factors influencing the CPL market behind the haze
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The CPL market has stopped surging since mid-December, while there are also some changes in the market, especially the environmental production problems.

1. Benzene market went down evidently.
Downstream styrene futures and spot market have both dropped, and SM index has been rising, but it is less likely for SM index to go up further.

Downstream market goes down, and benzene prices have dropped evidently since early-mid December, with large decreases for Asian benzene prices, while RMB benzene prices may be worse as January benzene futures are offered at 7,300yuan/mt.

2. CPL market is still supported by tight supply.

CPL plants are still supported by tight supply, though there is no support from costs. The operation rate of nylon 6 chip plants still stays at a high level, and the average operation rate is still 68%. Calculated by the average operation rate, the monthly demand for CPL is above 200kt, while CPL output is 186kt in November, so CPL supply is still tight slightly.

Downstream filament plants have purchased less nylon 6 chips since mid-December, with shrinking deals, and it is hard to lift chip prices. The operation rate may extend to hold steady before early-January, as there are still orders oversold previously.

3. The operation rate of CPL plants has been influenced by environmental protection in North China.
A large number of chemical enterprises have been influenced by environmental protection due to the haze in North China.
Enterprise Capacity(kt) Remark
Sinopec Shijiazhuang 100 The operation rate has dropped to 50% from Dec 16 due to problems of the unit.
Risun 100 The operation rate has dropped to 70% from early Dec under pressure of environmental protection.
Fangming Chemical 100 The operation rate has dropped to around 60% from Dec 19 under pressure of environmental protection.
Lanhua Sci-Tech 100 The new unit is in test due to some problems in mid-Dec.
Haili Chemical(Shandong) 200 The unit is not influenced.
Luxi 100 The unit is not influenced.

CPL units are influenced by environmental protection evidently in Hebei, and the operation rate of Risun’s CPL unit may reduce to 50% by the end of December. For areas in Shandong, there is little influence on units in Zibo and Liaocheng, but units in Heze are influenced evidently. Fangming Chemical has stopped its adipic acid unit, while the operation rate of its CPL unit has dropped to 60%. Besides, transportation has also been influenced largely as highways are closed due to the haze.

Due to environmental protection, benzene enterprises are influenced limitedly, and CPL enterprises are influenced slightly, with no influence on chip enterprises. In addition, CPL plants make large profits at present, and due to tight CPL supply, CPL plants are unwilling to stop production.

As a whole, CPL market may extend to be firm with slight increases due to tight supply, and players are suggested to focus on the inventory and the operation rate of chip plants.
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