FOCUS: Asia PTA makers cut output, stem losses

29 May 2007 05:25  [Source: ICIS news]

By Salmon Aidan Lee

 

SINGAPORE (ICIS news)--Asian purified terephthalic acid (PTA) producers have started cutting output this month as they expect poor demand or possible losses in June, company sources said on Tuesday.

 

However, it remained to be seen if these cuts will be effective as new capacities in China were coming on stream this year and local producers have not indicated that they will lower their output, they added.

 

At least 16 PTA lines in Asia have cut operating rates, shut down or would soon shut (see table).

 

“Many of us had learnt our lesson from previous years. Now, nobody wants to be caught having mounting inventories before they cut operating rates,” said a source from Chinese producer Yisheng Petrochemical who has not decided if it will cut output.

 

“If demand weakens in June and our margins get squeezed again, we will likely shut down more [capacity],” said a source from Siam Mitsui, Thailand’s biggest PTA producer, which would shut one line in June.

 

After suffering some losses in the first quarter, some PTA producers had been profitable since April.

 

Margins were as high as $40/tonne with May’s PTA at $960/tonne CFR (cost and freight) China and feedstock paraxylene (PX) contract at $1,165/tonne CFR Asia.

 

But June could prove to be a turning point for producers.

 

So far, PX costs had risen to $1,280-1,290/tonne CFR Taiwan in the spot market, while the June PX contract price could also settle around that level, the sources said.

 

“Based on such PX prices, we would likely ask for a PTA price way above $1,000/tonne CFR China,” an official from Taiwan’s Tuntex Petrochemical said in Mandarin.

 

But another two Taiwanese producers said they were unsure if customers would accept that price as June was the low season for polyester makers.

 

“June is the seasonal lull for the entire polyester and textile sector so the demand for PTA would in theory be weaker than in May,” a trader from Shanghai-based C & J International said in Mandarin.

 

A leading Japanese producer has already met resistance from its Chinese customers when it indicated on Friday that it would like to sell June material at $1,020/tonne CFR China.

 

“There are signs pointing to June having either a rollover or a slightly lower price than May’s [$960],” an official from Xiang Sheng Group, a major buyer in eastern China, said in Mandarin.

 

However, the cuts may not be effective as four new PTA plants had started or could start up in China and none of the Chinese producers indicated that they would cut operations, said an Itochu Corp trader.

 

“The Taiwanese, Koreans and those in [southeast and south] Asia can cut operating rates, but the capacities in China could more than make up for the volumes lost,” he added in Mandarin.

 

Company	Location	Capacity (‘000 tonnes/year)	Operation status/turnaround
Samsung Petrochemical	South Korea	No 2 (420) No 3 (450)	Cut operating rate to around 80% between May and June
Samsung Petrochemical	South Korea	No 4 (700)	One week, mid-May
Sam Nam Petrochemical	South Korea	No 4 (500)	One week, mid-May
Mitsui Chemicals	Japan	No 1 (205)	One month, June
Mitsui Chemicals	Japan	No 2 (165)	Two weeks in May
Mitsubishi Chemical	Japan	250	Three weeks from end-May
China American Petrochemical Co	Taiwan	No 1 (250)	Shut since Jan 2007 for mechanical modifications
China American Petrochemical Co	Taiwan	No 3 (250)	Four weeks between end-April and May
Tuntex Petrochemical	Taiwan	440	Reduced operating rates since end-April
Amoco-Mitsui	Indonesia	460	17 days starting mid-May
Polyprima Karyareksa	Indonesia	480	10 days in mid-May
Polysindo	Indonesia	340	Reduced operating rates since Jan 2007
Reliance Industries	Hazira, India	No2 (510)	About 10 days, starting end-May
Siam Mitsui	Thailand	No3 (500)	One week in mid-June
Indorama Petrochem	Thailand	700	One week in early May

Sources: Companies

 

By: Salmon Aidan Lee
+65 6780 4359

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