CPL sacrifices price for quantity in 2024

At the end of the year, nylon industry chain concludes in an ungraceful manner, primarily due to the poor price situation.

The annual average price shows a negligible difference compared to 2023, but the decline throughout the year has become increasingly outrageous. Correspondingly, another prominent point is the quantity. CPL production from January to December is expected to reach around 6.4 million tons, an increase of 27% compared to last year. It can be said that CPL vividly illustrates the core theme for the majority of commodities in Chinese market in 2024: sacrificing price for volume.

When compare the various products in the nylon industry chain horizontally with synthetic fibers like polyester, polyethylene or polypropylene, we find that industrial product prices have generally fallen this year. Moreover, these prices are at historically low levels, excluding the pandemic year.

Not only industrial products but also major consumer goods such as houses, cars, and even individuals themselves reflect that the so-called "involution" is essentially a form of discounting price for volume (increased labor input with reduced value). Although this is a spontaneous result of market adjustment, it is not something that micro-level entities are happy to see.

Returning to the industry, while nylon has its own peculiarities, it cannot escape the macro trends. Conversely, the current state of CPL prices is merely a case of the internal drive for sacrificing price for volume in the context of synthetic fiber raw materials.

Due to pressures from maintaining growth and employment, most raw material factories face numerous constraints in operational adjustments. Especially since this industry has a high proportion of state-owned enterprises, price is currently a secondary consideration in final decision-making.

In December, the Central Economic Work Conference emphasized the need to "focus on achieving a stable combination of growth, stable employment, and a reasonable recovery in prices," clearly identifying "promoting a reasonable recovery in prices" as one of the important policy goals. Specifically, this is closely related to the implementation of macroeconomic policies. For instance, in terms of monetary policy, it was mentioned to "maintain ample liquidity, ensuring that the scale of social financing and money supply growth aligns with economic growth and price level expectations," thereby creating a favorable monetary and financial environment for a reasonable recovery in prices.

Looking ahead to 2025, interrupting the deflationary process and reversing the "sacrificing price for volume" involution pattern will not be easy, but at least the issues are being acknowledged now. In the future, with the strengthening of counter-cyclical policies, industrial products like CPL, which do not have poor fundamentals, may be among the first to emerge from the price trough.