CMAI predicts downstream nylon demand to shift to Asia

27-Dec-07

As the growth and profitability of nylon fibers is declining, many companies have and will continue to divest nylon fiber assets from their portfolios. CMAI predicts that Asia will be the only location where any meaningful capacity additions are likely to occur. As downstream nylon mill demand increasingly shifts to Asia, assets in North America and West Europe will face growing competitive difficulty. Stranded natural gas and hydrogen (generated from steam crackers and isolated refineries) offer the best locations for cyclohexane investment, but this must be matched with benzene supply which may be a challenge. Middle East, South America and Asia will be the next logical candidates for investment. Caprolactam prices reached record levels in mid 2007, especially in Western Europe, as a result of benzene continuing to escalate strongly through 2006. Nevertheless, caprolactam producers around the world are running at high utilization rates due to brisk demand, although concern remains that high prices will eventually curtail demand. Over the forecast period, most, if not all, adipic acid investment will be in Asia. This will render excess capacity in the U.S. and Europe uncompetitive and dependant on a nylon 6,6 market in the U.S., which has an uncertain future. Previously, adipic acid's strength was its preferred status for carpet (nylon 6,6) and industrial resins. However, the continued elevated price of nylon, and advances in the processing of polyester in plastics and fibers, are making it difficult for adipic producers to remain competitive.