Polyamide Fiber Is Beset with High Cost

Review of 2005

CPL Output decreased

Due to the unstable production, the output of caprolactam (CPL)
in China was only 214 thousand tons in 2005, a drop of 6.1% from
2004. The import amount of CPL further increased in 2005. After
the capacity expansion in CAPRO Plant, in particular, Korea
greatly increased its supply amount to the Chinese market.
Compared with previous years the consumption growth of CPL was
slowed down. On one hand the supply was still not sufficient.
On the other hand the slackness in the polyamide fiber-6 cord
fabric sector inhibited the demand growth in 2005.
    Import sources of CPL in China have further changed in recent
years. The amount imported in 2005 was 71 thousand tons from the
United States, 69 thousand tons from Russia and 49 thousand tons
from Korea. The reason why CPL from the United States can occupy
large Chinese market share is that the overhaul of the 70
thousand t/a CPL unit in Nanjing DSM Dongfang Chemical Co., Ltd.
has enabled suppliers including Eastman to gain the opportunity
for increasing their output to bridge the demand in China. Russia
and Japan continue to have strong supply ability. Russia, in
particular, has always occupied the raw material processing
market in Chinese Mainland. Due to the capacity expansion of
CAPRO Plant and the domestic demand reduction, Korea has greatly
increased its export to Chinese Mainland.

Consumption of polyamide fiber chip grew stably

The capacity of polyamide fiber chip in China continued to expand
rapidly in 2005. Both the output and the import amount had an
increase and the apparent consumption grew stably. Most of the
capacity expansion is however for low-grade products and will
become a hidden worry for the future development of the polyamide
fiber sector.
   Polyamide fiber-6: The output of polyamide fiber-6 in China
reached 690 thousand tons in 2005, the consumption was 918
thousand tons and the import amount was 239 thousand tons. The
consumption is expected to be more than 960 thousand tons in 2006.
As the capacity in China is growing rapidly, the import amount
will have no great change. Taiwan province is still the main
import source of polyamide fiber chip. The amount imported from
Taiwan province in 2005 was nearly 100 thousand tons. Korea comes
next and the amount imported from Korea in 2005 was 28.7 thousand
tons.
   Polyamide fiber-66: The output of polyamide fiber-66 in China
was 120 thousand tons in 2005, the import amount was 100 thousand
tons and the apparent consumption was 214 thousand tons. The
situation is expected to have no great change in 2006.

Output of polyamide fiber increased rapidly

The capacity of polyamide filament fiber continued to increase
rapidly in 2005. The output of civil filament fiber, industrial
filament fiber and staple fiber tow increased by different
degrees. According to statistics from China Chemical Fiber
Association, the output of polyamide fiber in China reached
1.017 million tons in 2005 (higher than the output of 716.6
thousand tons based on data from the National Bureau of
Statistics of China because the National Bureau of Statistics
of China only counted the output in producers with an annual
sales revenue of over RMB5.0 million), an increase of 37.4% over
2004. Civil filament fiber was in short supply and 179 thousand
tons of civil filament fiber was imported in 2005, much higher
than the import amount of other varieties. Industrial filament
fiber had the greatest export amount of 103 thousand tons,
including 71 thousand tons of filament fiber cord fabrics.
   Civil filament fiber: The capacity of civil filament fiber
in China was 657 thousand t/a in 2005, the output increased
sharply from 320 thousand tons in 2004 to 550 thousand tons, the
export amount was 23 thousand tons and the import amount was 170
thousand - 180 thousand tons.
   Industrial filament fiber: The apparent consumption of
industrial filament fiber in China was 311 thousand tons in 2005,
an increase of 23.3% over 2004. The output only had an increase
of 0.7% mainly because downstream bias tires are gradually being
eliminated and the Eleventh Five-year Program (2006-2010) also
restricts the development of bias tires. The apparent
consumption of industrial filament fiber is expected to maintain
at 310 thousand - 320 thousand tons in 2006. The capacity of
industrial filament fiber reached 608 thousand t/a in 2005, the
output was 400 thousand tons, the import amount was 16 thousand
tons and the export amount was 103 thousand tons, an increase
of 45.1% over 2004. The consumption in downstream bias tires has
reduced drastically, but the industrial filament fiber cord
fabric sector has developed vigorously and become a major growth
point for the industrial filament fiber consumption and also a
major profit source for companies.
   Polyamide fiber in China has maintained a sound development
trend today. With the improvement of people's living standard,
the demand of polyamide fiber as a high-grade textile raw
material will present a rising trend and the apparent
consumption will also increase stably.

Projection for 2006

The polyamide fiber sector can hopefully maintain the sound
development trend in 2006.
     (1) The problem of irrational tariff relationship has
aroused attention and policy readjustments will hopefully be
made. The serious irrational tariff relationship has greatly
affected the international competitive edge of downstream
products. The import tariff is 9.0% for CPL, 8.6% for chip and
5.0% for filament fiber. The price competitive edge of domestic
polyamide fiber is therefore weakened. With the efforts made by
relevant departments, appropriate readjustments will hopefully
be made in 2006.
     (2) The capacity in the 4 CPL producers in China is not large
today. They are all making capacity expansion. After the
completion of these expansion projects the output of CPL will
have a further increase in 2006.
     (3) The market price will still be at a relatively high
level. With the increase of the supply amount in the market,
however, the price will have an overall downturn trend. The price
trend of polyamide fiber in 2006 is expected to be identical to
2005, but the average price level will be lower than 2005. The
sustained high price of upstream raw materials such as oil and
benzene will continue to give support to the price of polyamide
fiber.
     (4) The apparent consumption of civil filament fiber will
have a further increase. The demand growth of industrial
filament fiber will still lack force. The development of the cord
fabric sector, in particular, will be slowed down.
     (5) There will be less new polyamide fiber projects. As
investors take a cautious attitude towards new polyamide fiber
projects, most investments will be made in the capacity
expansion of some existing plants in 2006.

Table 1  Supply and Demand of CPL in China
                in Recent Years    (thousand tons)
Year    2001    2002    2003    2004    2005
Output    152 &