After 9-year gap, FACT restarts Caprolactam production

After a gap of nine years, the public sector FACT has restarted its Caprolactam production, which was suspended in 2012 following the rise in feedstock price of naphtha and furnace oil.

Caprolactam, produced only by FACT and Gujarat State Fertiliser and Chemicals in India, is a raw material for the production of Nylon-6, which in turn can used for the production of tyre cords, filament yarn, fishing nets, engineering plastics, etc.

Demand potential

The domestic demand for the product is in the range of 1.2-1.3 lakh tonnes per year. The annual production of 50,000 tonnes of Caprolactam will also result in the production of 2.25 lakh tonnes of Ammonium Sulphate fertiliser. FACT Caprolactam will be a key import substitution.

It is expected that the resumption of Caprolactam production would add about ₹700 crore per annum to the turnover, the company said in a statement. According to official sources, the fertiliser company had discontinued Caprolactam production in October 2012 in the wake of rising cost of benzene and naphtha thereby making the project un-viable. In 2013, FACT shifted to natural gas sd its new feedstock, but during that time its price was ruling high, preventing the re-start of Caprolactam.

However, the slump in the crude prices in 2015-16 and resultant fall in gas prices in the international market has prompted the company to re-start Caprolactam operations.

Stock movement

The markets have been giving a thumbs-up to the company with its share price shooting up sharply from ₹40 to ₹150 levels and is now quoting at around ₹125, says Akshay Agarwal, Managing Director of the Kochi-based Acumen Financial Services.

The company has been recently making waves in the PSU sector and has become one of the fastest growing public sector undertakings. “The new line of production will help FACT to boost the momentum and we expect the company to improve its turnover from the current ₹3,200 crore to over ₹4,200 crore in the current year,” he said.

Hitherto, Caprolactam was being imported from South Korea and Thailand and its production would result in FACT producing ammonium sulphate which is also used by farmers as an artificial fertiliser for alkaline soils.