FocusChina ADD to force S Korea, Thai PTA makers to rethink business

02 February 2010 08:07  [Source: ICIS news]

 By Becky Zhang

SINGAPORE (ICIS news)--China's restrictive duties on purified terephthalic acid (PTA) imports will send Thailand producers looking for new markets and South Korean suppliers to swallow hefty price cuts to retain business with Beijing, industry sources said on Tuesday.

The Chinese authorities slammed a provisional anti-dumping duties ranging between 2.4%-20.1% on Korean and Thai PTA effective 3 February, while an extended investigation on possible dumping activities will be conducted over a period of six months, according to the country’s Ministry of Commerce.

South Korea accounted for 42% or 2.15m tonnes of China’s total PTA imports and 90% or 1.06m tonnes of the country’s imports of qualified terephthalic acid (QTA) in 2009, based on official statistics.

Thailand, on the other hand, sold 620,000 tonnes of PTA into northeast Asian country in the same year, giving it a 12% share of China’s imports of the chemical.

With the prohibitive duties in place producers in Thailand would be hard-pressed to look for alternative markets that would absorb their PTA output, while Korean producers would have to lower their prices to retain the key China market, traders said.

“The duties of 12.2-20.1% on Thai material were higher than our expectations and will definitely take a hard beat[ing] on producers,” said a China-based trader.

“Thai material is expected to vanish from the Chinese spot market,” he added.

The announcement of a provisional ADD, although long expected, still came as a shock, putting market players at a loss on how to price PTA supplies on Tuesday morning trade, industry sources said.

“Although ADD has been talked about in the market for a long time and everybody have already made various preparations on that, the sudden announcement still brought the market to a standstill,” another trader said.

Some producers in Thailand, anticipating the ADD axe in China to fall anytime this year, had started diversifying into other markets like India where there is a lack of PTA supply, said a major regional trader dealing with Thailand cargoes..

“We have substantially reduced our export volumes to China,” said a source at a major Thailand PTA producer. “For the past one year we have been exploring other markets away from China market.”

The loss for South Korea and Thailand, meanwhile, spells good news for Taiwan – the second biggest exporter of PTA into China with a 37% share, equivalent to 1.9m tonnes, of the country’s total imports last year.

A number of traders were keen to raise offers for Taiwanese cargoes, which would be exempted from China’s provisional but a successful price hike would depend on the strength of demand from PTA’s main downstream – the polyester sector, industry sources said.

Demand from polyester makers started to show signs of softness ahead of the week-long celebration of the Chinese Lunar New Year from 13 February.

“We don’t need to buy spot imported cargoes as our demand has been fully covered by contract volumes till the end of February,” said polyester producer based in Jiangsu.

“We will consider reduce[ing] our operating rates during the holidays as the polyester sales would keep thin in the period,” a Jiangsu polyester producer said.

China’s domestic PTA producers, which the recently slapped policy hoped to protect, now anticipate local prices of the material to increase, industry sources said.

Notional selling ideas for domestic cargoes have gone up by yuan (CNY) 200/tonne ($29.3/tonne) on Tuesday to more than CNY8,000/tonne from Monday, industry sources said.

The PTA futures contracts traded on the Zhengzhou Commodity Exchange also reacted to the new policy, with prices for material for May delivery rising CNY 80/tonne ex-warehouse on Tuesday.

“It is definitely good news for us,” said a source at a major Taiwan producer, adding that it was good to remove the uncertainties from the PTA market.

($1 = CNY6.83)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
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By: Becky Zhang
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