The bullish performance of caprolactam in January 2023 was out of market expectations.   unit: yuan/mt Benzene listed price (North China) Benzene listed price (East China) Benzene East China spot CPL RMB spot Nylon 6 CS chip spot end-Dec 6500 6500 6450 11160 12100 Jan 10 6850 6650 6820 11860 12650 Increase 350 150 370 700 550   The increase in CPL market in January 2023 was largest, compared with its upstream benzene and downstream nylon 6 chip. And the rise in conventional spinning chip market was also due to the strong push in CPL.   The “abnormal” rise was fired by an auction trading of Lunan Chemical Though the rise in CPL was supported by firming benzene cost and downstream speculative restock, it was still quite “abnormal”, since CPL supply had expanded, when Luxi and Lanhua had both restarted in end-Dec. Observing this round of increase, the abnormal post-holiday rise began with Lunan's auction last Wednesday (Jan 4, 2023).   On Jan 4 morning, there were still low-priced trades done at 11,300yuan/mt, delivered to Jiangsu. The changes happened at noon time, as continuous flow of players came to participate in CPL auction trade, and the final price was locked at 11,750-11,760yuan/mt, 6 months BA, ex-works, or 12,000yuan/mt 6 months BA, delivered. The trading volume was 1,000 tons. This high price had fired up the market, and elevated market expectation. CPL seller and buyer had been in a short bargain afterward, and the sell side won it due to limited CPL stocks. Coming into this week (Jan 9-15), spot price was nailed around 11,800yuan/mt, 6 months BA, delivered.   As far as the author was known, the auction trading on Jan 4 had indeed some unexpected factors, and the influence of this transaction has been over-interpreted and magnified by market players. But since it involves individual enterprises, we don't talk too much about it here. But in terms of the change in the composition of the bidders, this may cause some turbulence in CPL spot trading in 2023.   CPL spot trading becomes more important in 2023 First of all, spot transactions have drawn significantly increasing attention of the market, since starting 2023 part of contract buyers switch to secure cargoes from the spot, and some CPL suppliers (other than Sinopec and Nanjing Fibrant) changed their contract pricing basis from the Sinopec's settlement to the monthly average spot price. In addition, some of the integrated enterprises that used to be CPL sellers have also joined CPL procurement group this year, which can indeed play a role in accelerating price increase in some stages where the rising situation is more established.   The product characteristics of low storage capacity and low inventory determine that the supply and demand of CPL has always been very delicate, and the relationship between supply and demand is often changed by one or two orders and one or two sets of devices. In a poor market environment, prices may fall even if the CPL plants have no stock and downstream either have not replenished stocks. This has been common in 2022, which is why spot goods are so popular in East China. In addition, CPL transactions are simple and lack of traders, so the advantageous side, upstream or downstream, are easy to manipulate the market.   But from 2023, the situation may become more complicated, as trader, who is a natural long-side speculator, has joined the game between CPL sell and buy sides. In the future, it will not be ruled out that even enterprises will follow suit and join the speculation on the long. What will happen in the end? it is difficult to assess at present, which needs to be further observed. Only in terms of operation, this is not difficult, since CPL trading is only a small plate compared to other bulk commodities after all. From the perspective of fully anticipating the cruelty of the market, we assume that a small and big game can be played again.   From a neutral point of view, from a larger dimension, such behavior itself will promote the maturity of CPL and nylon industry chain. As an enterprise, it needs to think, adjust its strategy and adapt to the new pattern. CPL has already seen an unusual start in 2023!