Polyester to grow in China/India, Europe to struggle - Reliance

26 November 2009 11:45  [Source: ICIS news]

AMSTERDAM (ICIS news)--New paraxylene (PX) capacities in Asia and the Middle East will put significant pressure on European suppliers in 2010, said Rajen Udeshi, president of the polyester chain at Indian chemical giant Reliance Industries, on Thursday.

Speaking at the 8th European Aromatics & Derivatives Conference in Amsterdam, the Netherlands, Udeshi said that the majority of trade within the polyester sector would take place in China and India over the next few years, and this would put pressure on the European sector, which had primarily taken its cues from Asia and arbitrage opportunities this year. Around 98% of PX is consumed in the polyester chain.

He added that inefficient PX capacities working from a toluene or mixed xylenes (MX) base would have difficulties surviving. Udeshi also cited the example of European plants that were dependent on MX coming from the US, questioning the sustainability of such business models and their margins.

Reliance Industries had been able to capitalise on the strength of its integration, something that Udeshi saw as a tool for ensuring its own economics. However, he added that domestic demand would still be the key driver for future investment.

Within countries such as China and India, the polyester sector had seen growth rates of 6-7% over the past 12 months. Although 2008 saw very little expansion, domestic consumption continued to grow, Udeshi said.

It was this domestic demand, fuelled by a young population and a growing consumer class, that would help countries such as China and India avoid the arrested growth levels seen in former polyester powerhouses such as Indonesia when manufacturing shifted elsewhere, he added.

With the sector seeing some regained confidence and the new phase of expansion in both Asia and the Middle East, Udeshi said that increasing capacities designed to meet growing demand levels in the polyester chain would see a new wave of investment.

“It is a fact of life that demand for polyester is coming from countries such as China and India,” Udeshi told ICIS on Thursday. Increasingly, those countries are being seen as manufacturing hubs as well, he said.

Although downstream purified terepthalic acid (PTA) demand in Asia had proven erratic in the second half of 2009, Udeshi said that with global cotton production in decline since 2007, polyester would be the future of the fibres market in the years to come.

Despite the focus on domestic trade and demand, Udeshi pointed out that Reliance Industries, responsible for 3% of India’s total GDP, was also a substantial exporter. The company’s export business was said to account for more than half of its revenue.

The 8th European Aromatics & Derivatives Conference, jointly organised by ICIS and International e-Chem, takes place from Wednesday 25 November to Thursday 26 November 2009.

($1 = 0.67)

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By: Truong Mellor
+44 208 652 3214

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