CPL supply assurance in the countdown

The above chart shows the trade pattern of CPL in the year-to-date period in 2024. Excluding the amount used by integrated facilities (in-house use), external sales account for about 60% of the total supply, with spot transactions making up less than half.

In the fourth quarter, there will be significant new capacity for nylon 6 chips, while the increase in CPL capacity is far from sufficient, indicating that CPL supply will inevitably tighten. Although there may be considerable profit pressure, the consistently high operating rates of chip factories in the first three quarters are likely to continue, highlighting the importance of supply assurance.

Before the armies move, the logistics must be prepared. From some details, it can already be seen that many downstream polymer plants are beginning to take actions in advance. Some previous spot transactions have already shifted to contracts or are gradually negotiating to switch to contracts, leading to an increasing proportion of contracts in the entire market.

The second chart illustrates the supplier distribution for spot transactions in Jan-Aug 2024, with Risun, Hunan Petrochemical, and Lunan being the top three spot suppliers. Based on weekly spot negotiations, the discussions are primarily centered around these three major suppliers.

From late September to the end of November, Hunan Petrochemical, Lunan, and Shenma will reduce CPL external sales in conjunction with the production of supporting facilities like Yuehua New Materials, Juheshun Shandong Phase II, and Shenma Puli polymerization units. This may even involve the volume of existing contracts. The market is interconnected; once existing channels and volumes are altered, the impact will spread widely.

Currently, it can be confirmed that by the end of 2024, the proportion of contracts will further increase, while the share of spot transactions will decline to around 15%.