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Insight | Time: Oct 11 2019 2:28PM
Nylon 6 chip inventory builds up after holiday
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In the three working days after the long holiday, affected by the decline of benzene and the sluggish performance of nylon 6 chip market, the price of CPL also fell simultaneously. In fact, there was no evident problem in CPL supply and demand structure, and the timely benefits of CPL did not change too much. This trend was mainly in line with the upstream and downstream sectors.

After the holiday, the performance of nylon 6 chip market was worrisome. The price of conventional spinning chip fell sharply. Before the National Day, there were already some sources softening, as some chip plants worried about the inventory pressure after the holidays and cut prices to promote sales in advance. During Oct 8-10, CS chip prices dropped continuously. So far, the mainstream discussions were around 13,200-13,400yuan/mt, with several sources available to 12,900-13,000yuan/mt, by cash, ex-works.

Compared with the quick reaction in nylon 6 CS chip market, there were bigger potential problems in HS chip market actually. It was mainly in inventory.

As shown above, the stock of nylon chips continued to rise since mid-September. According to the latest statistics after the holiday, the average inventory of nylon chip plants had reached 12 days (calculated on the basis of full production), which could be calculated to be 150,000 tons according to the current chip production capacity and efficiency. As can be seen from the above chart, the current inventory had gradually approached the highest level in the second quarter of this year. In the second quarter, chip plants finally reduced its inventory through a large-scale reduction of production. Based on the bearish outlook toward downstream demand, it was rather probable that HS chip plants would cut production. Many plants including Fangyuan, Haiyang and Jinbo had started lowering the run rate already. But fortunately, the contract trading could barely be maintained, and the problem might be solved by reducing production and contract. However, it was doubtful how long could the market stand the constant impact of low prices.

After the comprehensive analysis, CPL market after the holiday is mainly based on the same trend of upstream and downstream price reduction, and the benefits are be maintained. Nylon 6 CS chip prices have dropped quickly these days, and it could be over reaction, since downstream have not restocked too much before the holiday. And pressure for nylon 6 HS chip is even larger, as the stocks are piled up high. Players may follow production change of nylon 6 HS chip plants recently.
[RISK DISCLAIMER] All opinions, news, analysis, prices or other information contained on this report is provided by analyst of Zhejiang Huarui Information Consulting Co., Ltd (CCFGroup) as general market commentary and does not constitute investment advice. CCFGroup will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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