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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
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