Introduction: Recently, the caprolactam market has continued its weak trend. The upstream benzene price has been declining, weakening cost support and further reinforcing downstream bearish sentiment. End-user procurement remains insufficient due to rigid demand, with a strong wait-and-see attitude. The downstream PA6 sector itself suffers from high inventories and falling product prices. The caprolactam market is under pressure from both cost and demand headwinds. This bearish pattern is unlikely to reverse in the short term, and caprolactam prices still have room for further decline.

Market sentiment continues to weaken; caprolactam price center gradually shifts lower

The caprolactam market continued to decline in May. The benzene price fell, with spot prices in the East China market reaching around 7,650 yuan/ton by the end of May. Sinopec’s benzene listing price was lowered to 7,700 yuan/ton. The decline in feedstock prices weakened cost support for caprolactam. Although caprolactam producers reduced operating rates, the intensified negative feedback from the demand side in May further pressured the market, causing the spot negotiation center for caprolactam to gradually decline. By the end of May, the spot price of caprolactam in the East China market was 11,500 yuan/ton (acceptance delivery). The average spot price in East China for May was 11,923.68 yuan/ton, down 8.38% from the April average.

Despite reduced operating rates, companies struggle against demand-side headwinds

Table 1: Monthly Caprolactam Supply-Demand Balance (Unit: 10,000 tons, yuan/ton)

| Indicator | May | April | Change | Change (%) |
| --- | --- | --- | --- | --- |
| Production | 54.88 | 54.14 | 0.74 | 1.37% |
| Import Volume | 1.17 | 1 | 0.17 | 17.00% |
| Total Supply | 56.05 | 55.14 | 0.91 | 1.65% |
| Downstream Consumption | 54.17 | 54.57 | -0.4 | -0.73% |
| Export Volume | 1.58 | 1.2 | 0.38 | 31.67% |
| Total Demand | 55.75 | 55.77 | -0.02 | -0.04% |
| Supply-Demand Gap | 0.3 | -0.63 | 0.93 | 147.62% |

In May, caprolactam producers continued coordinated production cuts, gradually lowering capacity utilization rates. By late May, the overall capacity utilization rate had dropped to slightly below 70%. However, on one hand, higher operating rates in late April and early May led to inventory accumulation at some plants. On the other hand, intensified negative feedback from the demand side in May also reduced operating rates at polymerization plants. Amid falling feedstock prices and worsening losses, raw material procurement slowed. Overall, the caprolactam supply pattern remained slightly loose in May. Production cuts could only partially destock and slow the price decline, but could not reverse the weakening trend.

Persistent weakness in end-user demand has always been a key factor suppressing the PA6 and caprolactam markets. In May, downstream textile, industrial plastics, and film sectors reduced orders further. Insufficient order reserves led to oversupply and intense competition across PA6 chip, spinning, and other stages. Product prices continued to fall, losses deepened, and operating enthusiasm remained low. PA6 chip inventories remained high in May. Prices of conventional spinning chips often inverted compared to caprolactam prices. According to chempricehub data, by the end of May, prices of conventional spinning chips in the East China market fell to 11,300-11,500 yuan/ton (cash delivery), and average inventory at sample conventional spinning chip producers increased to 19 days. Downstream bearish sentiment remained strong.

Cost and demand headwinds unlikely to reverse soon; caprolactam prices to continue declining

Cost side: Although negotiations between the US and Iran remain divided and a memorandum of understanding has not yet been formally signed, so market concerns have not been completely eliminated, most institutions still believe the outlook is broadly optimistic. WTI is expected to trade in the range of 85-93 USD/barrel, and Brent in the range of 90-99 USD/barrel. Although benzene’s supply-demand pattern continues to show destocking, crude oil is performing weakly, and benzene market prices continue to adjust downward the premium brought by geopolitical conflicts. Near-term market negotiation is expected to be in the range of 7,500-7,900 yuan/ton.

Supply and demand: Caprolactam plants are currently operating at about 70% capacity. No further maintenance shutdowns are planned for June, and some units that were shut for maintenance in May are gradually resuming. If no further production cuts or shutdowns occur, the supply pattern will remain slightly loose.

Demand side: End-users lack sufficient rigid demand orders and hold bearish sentiment. Traders and downstream companies mainly adopt a wait-and-see attitude. In the short term, chip sales are unlikely to achieve significant volume. The high inventory and low operating rate situation in downstream PA6 plants is unlikely to change quickly.

Overall, in the short term, the caprolactam market will continue to be pressured by both cost and demand headwinds, with prices likely to continue a volatile downward trend. Without unexpected bullish catalysts such as a feedstock price surge or concentrated downstream restocking, a market rebound is unlikely. Future focus should be on upstream benzene price fluctuations, changes in downstream PA6 plant operating rates, and the follow-up of end-user orders.