Bearish Trend in the US Caprolactam Prices at Year-End 2023 Amid Slow Market offtakes
Bearish Trend in the US Caprolactam Prices at Year-End 2023 Amid Slow Market offtakes

Bearish Trend in the US Caprolactam Prices at Year-End 2023 Amid Slow Market offtakes

  • 09-Jan-2024 2:38 PM
  • Journalist: Jacob Kutchner

The price of Caprolactam followed downturn in December 2023 and extended into the first week of January 2024 in the US. This downward movement can be attributed to weak demand conditions and an ample flow of material in the market.

In December, the US manufacturing sector experienced a further contraction, marked by a decline in output and an acceleration in the downturn of new orders. The feedstock benzene remained weak, supporting the production cost of Caprolactam in the domestic market. Reduced total new sales reflected weaknesses in both domestic and external demand, prompting firms to adjust their input buying and hiring activities accordingly. Signs of increased spare capacity were evident through a faster decline in backlogs and destocking, as companies sought to better manage cash flow. Many businesses cited weak client demand, attributing it to lower purchasing power among customers and global economic uncertainty. Orders from overseas markets also declined and returned to contraction.

At the end of 2023, firms in the US market lowered their production levels in response to weakened demand conditions for Caprolactam. The US Manufacturing Purchasing Managers Index (PMI) experienced a decline compared to the previous month's data, signifying reduced orders for Caprolactam. A significant factor contributing to the overall decline in operating conditions was a more pronounced decrease in new orders during December. This suggests a challenging business environment with lower demand, influencing production decisions and impacting the broader manufacturing sector.

In an effort to implement cost-cutting initiatives, firms aimed to reduce stocks, leading to a decline in both pre- and post-production inventories in December. Simultaneously, subdued client demand resulted in a third consecutive monthly decrease in employment at the close of 2023. This highlights a strategy of inventory management and workforce adjustments in response to the challenging market conditions characterized by muted demand.

Despite an increase in auto sales, the demand for Caprolactam remained weak due to the ample availability of the product in the market, effectively meeting domestic requirements. In a ripple effect, the cost of Caprolactam depreciated by 1.7% on a week-over-week basis, measured FOB Texas, during the last week.

It is anticipated that the cost of Caprolactam is likely to increase in the coming months, prompting merchants in the US market to potentially rebuild their product inventories. The observed rise in automobile sales in December 2023 is expected to contribute to an uptick in demand for Caprolactam in the coming weeks.

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