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Nylon industry pattern outlook under the trend of integration
!!Zhao Juan, Senior Analyst of CCFGroup

2019-09-11 11:58:10
Zhao Juan, Senior Analyst of CCFGroup, delivers her report of Nylon industry pattern outlook under the trend of integration 

Ms. Zhao's report is mainly divided into three parts. 

I. The dramatic change of 2019 
In 2019, the price volatility gradually narrowed, and all sections' operating rates deviated. NFY plants had no longer low inventory (in 2019 inventory fluctuated in 20-30 days), and nylon 6 chip inventory reached a recent high (near 1 month), and the polymer contract processing fee dropped freely. The efficiency of all links in the industrial chain is greatly reduced (CPL benefits are compressed but not yet lost, PA6 profits are reduced to near the cost line, spinning benefits are reduced, etc.). 

II. The driving force of industry change 
Industry chain supply and demand: PA6 large capacity expansion (800kt/year in Jan-Aug 2019), mainly high-speed spinning, accounting for 68%. Demand is contrary to the trend (high-speed spinning capacity surged but feather yarn demand decreased significantly / car consumption growth rate decreased ). CPL is not as strong (price trend is more relevant to NFY plant run rate). 

End users' demand problem: domestic end users' sales growth slowed down; resident disposable income increased steadily; per capita clothing consumption expenditure growth was limited; export growth rate was low. 

Impact of other fiber price changes on nylon demand: comparison of polyester fiber, acrylic fiber, viscose staple fiber, cotton, etc. 

III. The future of the nylon industry is imaginative 
The expansion of CPL and PA6 is still at its peak, while the downstream expansion is limited. The industry concentration is expected to continue to rise (the concentration of PA6 is rising rapidly due to large expansion and frequent mergers and acquisitions). The integration trend is more obvious (The ratio of CPL and PA6 integreted is higher, and the ratio of PA6 and downstream is lower). The substitution is still continuing (import decreases while export increases) and anti-dumping restricts fiber exports (India, Turkey, Brazil). The industry enters the integration period upstream and downstream (PA6: Highsun, Gulei, etc.; PA66: Invista, Tianchen Qixiang, etc.). 

IV. Summary: 
Industry costs will be further compressed, and the pace of eliminating backward production capacity will also accelerate (passive elimination, voluntary withdrawal). 
Mergers and acquisitions between upstream and downstream or peers are still continuing, and cooperation with complementary shortcomings will increase. 
Low profit or loss, it is difficult to avoid in the process of industry shuffling, and the drawbacks of exhausting the fish and fishery gradually appear. 
The trend of scale and integration will accelerate the research and development of nylon products. 
Nylon 66 may replace nylon 6. 
Nylon 6 may replace other fiber or non-fiber.
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