Nylon – Moving into a brave new world

It has been quite a year since COVID-19 disrupted the supply chain and crushed consumer demand. The nylon industry was greatly impacted during the pandemic but has gradually recovered from the nadir in the second quarter of 2020, although various developments were observed among different applications as the pandemic has changed our lifestyle and spending patterns. We are moving into a brave new world where greater sustainability and powertrain renovations will paint a different picture for the future of the nylon industry.

COVID-19 has changed our lifestyle and spending patterns
As the pandemic progressed, US retail sales were greatly impacted. However, some sectors had better performance than others. Based on IHS Markit's US retail sales data, motor vehicles and parts, and home furnishing were the leading growth categories with sales snapping back to the pre-pandemic norm (2019 Q4 level) in Q3 2020. On the other hand, apparel and department stores and restaurants were among the hardest-hit sectors. The recovery has come a long way but only returned to the pre-pandemic level in Q2 2021 against the backdrop of falling COVID-19 infection rates, states relaxing containment measures and an acceleration in the nationwide COVID-19 inoculation campaign.

In relation to the nylon industry, what has been observed is that these developments have resulted in improved demand in engineering resins, industrial filaments and residential carpets. Meanwhile, textile filament was struggling with a slow recovery, although it seems to have returned to a pre-pandemic norm. Carpets used in commercial markets are picking up, although a broad recovery is yet to be seen.

Emerging Trend - Sustainability
Emerging trends in the years to come will paint a different picture for the nylon industry. Sustainability is not a new topic and the consumer mindset was already demonstrating a shift in this direction, but the pandemic is accelerating the call to action to address environmental sustainability. At this point, less than 2% of nylon is recycled, which is much lower than polyester which is more than 10% recycled.

Generally, there are three approaches to recycling nylon. First is recycle/remelt of post-consumer products or industry waste. Second is de-polymerization and finally there is bio-engineering. The volume of recycling of post-consumer products or industry waste will remain limited as there is no common post-consumer collection system for nylon. De-polymerization is technically achievable and both fiber and intermediate producers are working towards this direction despite the cost disadvantage. However, the volume is also limited as simple nylon products like finishing nets or pure nylon garments are required and there is no well-developed collection and handling system. Bioengineering could be the winner from a cost perspective, but low crude oil prices have hindered investment interest. Therefore, the impact on virgin nylon 6 or 66 demand will be minimal in the short term. However, the pandemic has accelerated consumer preferences for sustainable products. Sustainability will become the sharp focus of the nylon industry post-pandemic, which will eventually impact virgin demand in the longer term.

Emerging Trend - Powertrain Revolution
Another important development for the nylon industry is the revolution in powertrains, where governments and automakers have set aggressive targets to accelerate the use and production of electric vehicles in order to meet stricter air pollutant emissions standards. Electric passenger car registrations have leapt during 2020, despite the pandemic dragging down the performance of the wider passenger car market during the year. This has resulted in growing market share for electric vehicles.

Global BEV production reached 2.4 million units in 2020 but is forecast to reach 13.9 million units in 2025, or roughly 14.5% of total light-vehicle production. Global vehicle production in general is weighted more heavily towards China, Europe, North America and Japan/South Korea; the same applies to BEV production. China, Europe and North America will host more than 85% of BEV production globally with China representing more than 40% alone. Most mainland China produced vehicles are expected to remain in China; export opportunities are greater for other regions.

The move to EVs will also provide additional markets for electric cable connectors and battery boxes, but remember this is at the expense of "under hood" applications, a boom for nylon ETP in current-day IC vehicles, with growth in turbo air ducts, engine covers, oil pans, etc. Ride hailing and ride sharing will also prompt more efficient, safer, and maintenance-free vehicles, which will lend itself to the greater use of sensors, airbags, and composites and molded plastics in place of metal, with aluminum being the primary competitor. Nylon producers are developing products for those markets, although technologies are still in formation, and the demand outlook remains highly speculative. Nylon producers remain quite bullish for the longer term, betting that demand gains in EV will outweigh the losses in IC vehicles.

A Brave New World!
The health crisis has changed our lives and our mindsets and we expect to see continued strong nylon demand associated with the residential sector even post-pandemic as people rethink the value of their homes. Meanwhile, the pandemic is also a wake-up call to protect our environment. There is increased interest and investment in nylon recycling, although the ride will no doubt be bumpy considering the cost, immature collection infrastructure and technology barriers. In addition, modes of transportation will shift and this will all have a profound effect on the marketplace for materials, but nylon will continue to secure a promising position.

IHS Markit Chemical Market Advisory Service: Global Nylon Fibers & Feedstocks helps clients monitor and assess current and future market dynamics for key nylon fiber types and their primary feedstocks. In a rapidly fluctuating industry, this service provides the essential data you need to optimize your market position.

Gain a comprehensive view of world markets for the entire nylon value chain, from upstream caprolactam to downstream fiber chip and more. Through continual, personal contacts with key industry participants, Chemical consultants gather data specific to the nylon 6 and 6,6 value chains which they then analyze and translate into meaningful insights and forecasting advice.

Posted 04 August 2021 by Meiko Woo, Executive Director Global Nylon Fibres and Feedstocks