China PA producers cut rates on squeezed margins

24 April 2008 09:40  [Source: ICIS news]

SHANGHAI (ICIS news)--Chinese phthalic anhydride (PA) producers have chosen to undergo turnarounds and reduce operating rates in order to compensate for squeezed margins on high feedstock values amid sluggish downstream demand, producer sources said on Thursday.

 

Feedstock orthoxylene (OX) prices were very high and production costs had increased substantially, meaning profits would be severely affected, said a company source from Jingzhou Pearled Chemical Co.

 

The Hubei province-based company planned to undergo a series of turnarounds at its 60,000 tonne/year PA plant starting from mid-April in a bid to curb the losses, the source added.

 

Meanwhile, Jiangyin Zhongrun Chemical Co was operating its 30,000 tonne/year PA facility at 60% of capacity.

 

“The downstream demand from dioctyl phthalate (DOP) and unsaturated polyester resin (UPR) are still weak compared to last year. Many factories do not have enough money to buy them as a result of [the] credit crunch and tight monetary policy,” said a source from Jiangyin Zhongrun.

 

“In addition, 2-ethylhexanol (2-EH), a feedstock for DOP, has also seen its prices rising quickly due to supply issues, hence affecting the buying interests for PA as companies will buy PA when they have sufficient 2-EH cargoes,” the source added.

 

Prices of 2-EH had soared by yuan (CNY) 400/tonne ($57.2/tonne) this week to CNY16,370-16,470/tonne ex-tank east China on tight supply, traders said.

 

Shandong Hongxin Chemical Industry Corp had been running only one of its two 50,000 tonne/year PA lines, the other one having been left idle since Chinese New Year, it said.

 

Plastic processors had resisted buying high-priced DOP cargoes, a company source added.

 

China-based Zhenjiang Liancheng Chemical Industry Co began shutdowns at its two PA plants from mid-April for a catalyst change and maintenance, a company source said.

 

PA prices were pegged at CNY9,350-9,450/tonne ex-warehouse (EXWH) east China, traders said, adding the PA market might rebound in late May.

 

Anson Li from CBI contributed to this article

 

($1 = CNY6.98)

 

For more on PA visit ICIS chemical intelligence

By: Judith Wang
+65 6780 4359

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