Nylon demand falls across major end-uses; China exports pressure margins – AdvanSix CEO

HOUSTON (ICIS)–AdvanSix is seeing global nylon demand declines across most major end-uses, Erin Kane, CEO of the integrated US-based nylon 6 producer said during the company’s third-quarter earnings call on Friday.

“Overall, we see demand declines across most key end markets, leading to further margin compression in the industry,” Kane said.

In North America, the higher interest rate environment is unfavourably impacting building and construction end markets, she said.

The high rates are also impacting consumer spending, with implications for nylon in packaging applications, she said.

However, auto has been a more “resilient” end market for AdvanSix, with the recent US auto worker strikes only modestly impacting engineered plastics demand, she said.

Meanwhile, low-priced imports are creating “competitive intensity”, she said, noting in particular exports from China.

“We are seeing China’s global nylon exports reach all time-highs” amid that country’s slower economy, thus putting pressure on nylon prices and margins, she said.

The company expects nylon industry margins to remain at “trough levels” through year-end, due to the unfavourable supply and demand conditions, she said.

With the softness across the key nylon end market in North America, AdvanSix would “continue to leverage various sales channels to meet demand where it exists, including a higher share of exports”, added chief financial officer Michael Preston.

On the positive side, underlying agriculture industry fundamentals are expected to remain favourable, boding well for ammonium sulphate (AS).

AS is a by-product of AdvanSix’s integrated nylon production process.

In North America, “the underlying fundamentals continue to support firm fertilizer demand, moving forward”, Kane said, adding: “Our current order book is robust”.

As for acquisitions, “accretive M&A has always been part of our framework” and the company continues to evaluate opportunities, she said, adding: “This is an interesting time” for M&A.

She was responding to an analyst on the call who suggested that AdvanSix, with its healthy balance sheet, should have the opportunity to expand with “bolt-on” deals in chemical intermediates, specialties or other products.

In Q3, AdvanSix’s sales fell 32.6% year on year to $323m, driven by unfavourable market-based pricing, whereas sales volumes fell only 1%.

(source: AdvanSix)

Thumbnail photo of AdvanSix CEO Erin Kane; photo source: AdvanSix