Tight credit regulations in China are making an impact on buyers who used to use letters of credit (L/Cs) to buy caprolactam, a key feedstock for a type of nylon routinely used in manufacturing processes.

The regulations, as well as an increasingly strong yuan, are pushing prices of caprolactam up in the region and buyers are stopping buying domestic output as they turn to dollar-denominated imports which allow easier credit access.

Cash flow stretched

"The lack of cash flow is quite serious," according to one China-based trader, who says that buyers are looking abroad for suppliers offering more favourable credit terms. "End-users facing difficulty in getting bank loans for domestic material are buying imports even though they have to pay more," he says.

"Requirements such as adequate deposits in end-users' bank accounts before they can open L/Cs are blunting buying interest," one regional producer said.

Strict controls

China implemented stricter credit controls late last year to curb excess liquidity and cool its economy.

Major worldwide caprolactam producers include BASF, Honeywell, Bayer, Toray and Sumitomo/Enichem.

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