After nine straight months of steep rise, caprolactum, an essential industrial chemical and primary raw material for nylon, is likely to witness a fall in prices by the end of this month.
Caprolactum is a versatile petrochemical used for production of nylon filament yarn (NFY) and nylon tyre cord fabric (NTCF). Nylon fibres in turn find application in apparel and furnishing textiles, industrial yarns, carpets etc. NTCF is used as reinforcement material in cross ply tyres.
Over one year, after remaining steady and even falling in some months, prices of caprolactum started rising from August 2010 from Rs 1,28,000 a tonne to Rs 1,78,500 a tonne in April 2011. However, companies are expected to reduce the prices by Rs 2-3 a kg by the end of this month as against raising it every month since August 2010, said official sources. In some months, prices went up even by Rs 15-20 a kg.
“The primary reason for bringing down prices now is sluggish global demand. Most of the units are saturated with inventory of caprolactum. The demand went up since many countries were coming out of recession which pushed up caprolactum prices from a low of $2,720 a tonne in June last year to a high of $3,500 a tonne at present,” said official sources.
However, this sluggish demand has resulted in decrease in prices of caprolactum globally from $3,500 a tonne to $3,400 a tonne in April 2011. At $3,500 a tonne, global prices peaked to all-time high,” said sources.
They further added that since in India, the price is revised to reflect the international prices, now the prices will come down. Besides, prices of benzene, the basic raw material for caprolactum has also started declining from $1,300 a tonne to $1,265 a tonne.
The rise in international caprolactum prices is mostly attributed to increasing global demand especially in China, the anti-dumping duty on caprolactum from the US and Europe imposed by Chinese government and rise in benzene prices due to high in crude oil prices.
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In India, Gujarat State Fertilizers & Chemicals (GSFC) and Fertilizers & Chemicals Travancore (FACT) are the sole producers of caprolactum. The total installed capacity of caprolactum in GSFC is 70,000 TPA and in FACT is 50,000 TPA in the financial year 2009-10.
Local manufacturers of nylon chips said the rapid rise in caprolactum prices over the last few months has led most manufacturers of nylon to shift to other polymers like polypropylene.
According to Capitalonline services, the earthquake followed by Tsunami in Japan and Chinese initiatives to cool down their economy are two major near term negatives for caprolactum.