FocusAsia PTA may extend falls as demand from China textiles slows

02 July 2010 06:53  [Source: ICIS news]

By Becky Zhang

SINGAPORE (ICIS news)--Asian purified terephthalic acid (PTA) prices may lose further ground this month on weaker demand, due to production cutbacks at a major downstream market - China’s textile industry, market sources said on Friday.

PTA has a strong application in polyester production, with the textile industry consuming a huge portion of the global polyester fibre output.

Most textile producers had stocked up on raw materials in June, and may not be as active in the market this month, industry sources said.

Restocking of polyesters in June provided the weak PTA market some respite, with spot values edging up to $835-860/tonne (€668-688/tonne) CFR (cost and freight) CMP (China Main Port) at the end of the month, before sinking again to around $830-855/tonne CFR CMP this week, based on ICIS data.

“We expect polyester demand to decrease in July after most textile factories [finished] stocking up enough raw materials in June,” the polyester maker.

Over the past three months, PTA prices had shed a total of $125/tonne or 13%, as general concerns about the eurozone debt crisis and falling crude prices gripped the petrochemicals market.

Expectations that crude prices have bottomed out triggered the restocking of polyesters, pushing inventory levels to 10-15 days against the normal one-week stock levels, market sources said.

“Textile plants had been purchasing polyester yarns actively in June as there was a need for them to replenish depleted inventory at the time when they sensed crude prices were about to bottom out,” said a Jiangsu-based polyester maker.

But polyester and textile production could be curtailed due to restrictions on electricity use of industries in Zhejiang province during the summer months of July to September, and could exert a strong pressure on PTA prices to market, industry sources said.

Zhejiang accounts for around 60% of China’s total polyester production.

“The electricity savings scheme in Zhejiang province may not have much impact on polyester and PTA plants, but will definitely bring down the operation at local textile plants due to their more flexible nature,” the Zhejiang polyester producer said.

The downstream textile market may have started to soften, said the producer, citing that his company’s sales-to-output ratio had dropped to 70-80% on Friday from 100-150% for most of June.

($1 = €0.80)

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By: Becky Zhang
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