Nylon chain demand to be driven by automotive sector in H2

For the second half of 2024, the automotive industry is seen as a major demand driver for nylon resins globally, especially nylon-66, with an indirect impact on upstream feedstocks cyclohexane, adipic acid and caprolactam.

China: Firmer demand from auto sector in H2

In mainland China, demand for nylon-66 resins, especially from the automotive sector, was subdued in the first five months of 2024 but industry participants see better days ahead in H2. According to a China-based buyer, Q4 is the peak season for the automotive industry as many manufacturers catch up with their production targets during this quarter.

S&P Global Mobility expects further export gains to provide the main positive effect for mainland China's automotive industry, forecasting higher production levels in Greater China for 2024 over 2023, up 2.3% at 29.7 million units. Also, China's EV sales continue to expand rapidly both domestically and abroad.

Still, according to sources, 200,000 mt/year of new adiponitrile (ADN) capacity from a new butadiene-based plant could result in greater supply of this feedstock. This could bring higher production of nylon-66 resins.

Further upstream, China's domestic producers of adipic acid grappled with high production costs arising from strong benzene prices in the first half of 2024. This was exacerbated by weak demand which prevented these producers from raising prices, resulting in poor or even negative margins. The same challenges are expected to persist throughout the year.

Hong Shen, Principal Analyst, Aromatics at S&P Global Commodity Insights noted that another 360,000 mt/year of new adipic acid capacity is scheduled to come on stream in 2024 although there is already ample supply in China. "Chinese domestic adipic acid production was around 2 million-2.1 million mt by 2023, and this further capacity addition is pushing average operating rates well below 70%," she added. The build-up of capacity has outpaced the Chinese domestic demand growth and this has led to intensifying oversupply and subdued prices.

Sluggish growth in EU automotive, construction industry

The European nylon market outlook is expected to remain weak, with the market's performance closely linked to the automotive and construction sectors.

Demand from the automotive sector is anticipated to see a slight increase post summer but overall growth is expected to be flat to negative due to cautious consumer spending. S&P Global Mobility forecasts Europe to produce 17.5 million units in 2024, down by 2.2% from 17.9 million in 2023.

Meanwhile, the construction sector experienced some growth in the UK but with regards to Europe, government-sponsored projects are expected to decline. Nonetheless, a modest boost in new housing demand could lead to a slight improvement in nylon demand.

On nylon intermediates, supply-wise, no significant tightness is anticipated for the second half of the year, with market participants expecting weak-to-stable demand across cyclohexane, adipic acid and caprolactam.

Caprolactam supply is currently tight but is expected to ease while adipic acid supply remains healthy and stable with cyclohexane seeing flat demand with no major supply disruptions expected.

Economic factors such as stubborn inflation and higher interest rates continue to hinder investments in the nylon industry. The manufacturing purchasing index indicates minimal growth, adding further pressure on future investments. Overall, while there is some optimism about market fundamentals improving, historical trends suggest this may not materialize significantly. The nylon intermediates market is expected to remain stable barring any unforeseen disruptions.

Americas: Overall fundamentals to remain stable

The US nylon industry anticipates stable supply and demand conditions in the lower base for H2. Supply disruptions in previous months for nylon-6 and mildly improved demand for automotive applications for nylon-66 could impact values in the third quarter.

Demand is expected to stay weak from construction and residential and office space carpets. Packaging demand is seen to be stable with some possible strengthening. Meanwhile, electrical applications demand is expected to increase. Overall, high US interest rates are expected to continue weighing on demand for nylon resins.

Plant maintenance in the nylon industry is expected to start at the end of the third quarter with minimal impact on fundamentals as nylon market participants are planning to reduce their inventory levels before the year ends.

In terms of trading flows, imports are expected to remain unchanged due to the existing high punitive import fees. However, exports of nylon-66 are anticipated to rise with the resurgence of robust plant utilization rates.

Supply of nylon-6 was tight in H1 2024, marked by product outages from two major producers. Consequently, announcements of price hikes were made for nylon-6 and caprolactam, as the near full effect is anticipated by the third quarter, with increases of 10-15 cents/lb.

Demand for nylon-66, which is primarily used in automotive engineering applications, is set to rise. For North America, S&P Global Mobility forecasts an increase of 2% in units of light vehicles produced to 16 million from 2023 to 2024.

Download PDF

Explore all stories

Chemical Trends H2 2024
This feature is part of our bi-annual report analyzing the biggest themes and trends that will dominate chemicals markets in the year ahead. Explore more features below, or to read articles looking at the year ahead for a wider range of chemical markets, visit Platts Connect

Global polyethylene, EVA markets to grapple with oversupply amid uncertain landscape in H2 2024

Methanol to see global supply expansion despite stable-to-low demand

Challenging conditions to continue to weigh on global ethylene markets in H2 2024

Freight markets look to stay firm in 2024 amid disruptions, longer voyages

Recycled polymers grapple with divergence in regional commoditization, inclusion mandates

Demand uncertainty to influence key benzene markets in H2 2024

Phenol, acetone demand to stay soft in H2 amid largely ample supply

Asian paraxylene braces for softer H2 as surging stocks restrain China demand

Demand to remain stagnant for H2 2024 and beyond as global chemical rationalization takes shape