Rising Crude Oil Costs Impact NTY Prices: Europe Sees Growth, North America Declines

Amidst the rising prices of crude oil across the globe due to the OPEC+ decision to extend further production cuts, the prices of Nylon Tire Yarn (NTY) showed an expected increment in the month of July 2023. NTY is used as a reinforcing material utilized by tire manufacturers across the globe.

In the European markets, the demand for NTY showed an increment which is reflected in the sales volume of the month of June 2023, showing an 18% increment. Factors responsible for such sales include the EU push for transitioning into the Electric economy as the market share of EVs increased commensurate to conventional automobiles. The demand for replacement tires declined in Europe in July. Previously, Q2 2023 showed a 12 percent decline in the sale of consumer replacement tires compared to Q2 2022. In the same period, there was a 28 percent drop in the truck and bus segment and a 34 percent drop in replacement agricultural tires. The supply side of NTY remained constrained in Europe due to inflationary and recessionary pressures. The price of NTY derivatives remained stable. Germany remained the top supplier. The European Tyre & Rubber manufacturers association (ETRMA) expects slower growth in OEM tire systems while a decrement in the sales of replacement tires for the whole year 2023.

On the other hand, in North American markets, the demand for NTY decreased in the month of July 2023. The new car sales declined by 4.6%. The inflationary condition created due to rising crude prices and disruption in supply chains is one of the major factors. The export performance of NTY also declined as Trans-Atlantic trade has suffered due to the recession in Europe. The replacement tire section in North America also declined by 3%, with heavy-duty vehicle tire replacement declining by 16%. On the supply side, the price of NTY feedstock polyamide and Caprolactam remained stable, with a marginal decline in the month of July 2023. The inventories remained high due to suppressed demand from the end-use industries.

In the Indian markets, there is a rise in the price of the NTY. The car sales volume went up 14% m-o-m basis in July 2023. The sales volume offset the muted growth in replacement and negative export sections. The price of NTY went from USD 2591/MT Ex-Delhi price to USD 2677/MT, indicating positive growth. The Chinese markets saw a decline in the price of NTY. There was a decrease in new car sales in the month of July 2023, with replacement tire sales shrinking by 7%. The inventories remained high due to the suppressed consumption from the downstream industries.

In order to hedge against the rising crude prices and their impact on NTY and its derivatives value chains, the Tyre manufacturers are looking for reprocessed NTY from reliable suppliers to cut costs and reduce carbon intensity. Century Enka, a subsidiary of Aditya Birla Group, is leading the way for other industry participants to transition production from a linear to a circular economy. Century Enka has a technology transfer agreement with Akzo Nobel and has produced Nylon tire Yarn commercially since 2012. The company first produces Caprolactam — the underlying raw material to make NTY derivatives and then the nylon chips. With the help of the transferred technology, the company can reduce the net requirement of virgin Caprolactam, hence its dependence on crude oil. Due to the limited economies of scale, about 10% of the total Caprolactam demand is met through recycling and reprocessing. The company has future plans to expand the operational utilization and the total capacity to produce the required material.