Rise in Interest Rates Impact Caprolactam and Downstream Textile Markets in Europe

The price of Caprolactam declined this week due to the weak demand from the downstream textile industries in the European region. Caprolactam's new orders from the domestic and overseas markets were reduced, and the product's expenses declined. The Caprolactam prices dropped this week by about 0.5%, and it will continue for further weeks. High inflation rates are currently affecting consumer spending in Germany, reducing purchasing power and driving up financing costs, both of which have an impact on the economy as a whole. The Caprolactam market is expected to be bearish throughout the first quarter of 2023.

Last week, the European Central Bank (ECB) made a significant rate increase of 50 basis points, demonstrating its willingness to provide banks with liquidity in the face of recent banking sector turmoil. The 20-member region's inflation has remained well above the target level, so this decision was long anticipated. The headline inflation rate was 8.5% in the preliminary data from February, a significant increase from the 2% the central bank wanted.

The European Central Bank (ECB) has committed to lowering inflation and plans to raise rates by 25 basis points in May and June 2023.

Furthermore, an increase in borrowing costs caused by an increase in interest rates may significantly impact employment levels. With the further challenges posed by the current retail environment, textile and apparel manufacturers are likely to be concerned. Countries such as India, China, and Vietnam have already seen a decrease in their textile and apparel exports to the Eurozone due to decreased demand as consumers reduce their spending.

According to the ChemAnalyst price monitoring, the cost of Caprolactam hovered around USD 3115/MT on a FOB Hamburg basis during the week ending 17th March 2023.

As per experts, the cost of Caprolactam will likely decline in the upcoming weeks due to the weak buying trend from the end-use industries. When interest rates rise, the demand for Caprolactam usually falls, which can cause the global textile industry to suffer. It is expected that the Caprolactam price is likely to decrease by 2% in March 2023.