FocusJAPAN DISASTER: China to cut PTA output on tight PX supply

18 March 2011 05:11  [Source: ICIS news]

PTA is primarily used in polyester production, with polyester fibre and yarn consuming over 75% of AsiaBy Becky Zhang

SINGAPORE (ICIS)--China’s production of purified terephthalic acid (PTA) will fall in April due to heavy turnarounds at plants, with some producers even bringing forward the maintenance schedule, due to limited availability of feedstock paraxylene (PX), industry sources said on Friday.

Quake-related disruption to Japan's PX exports for a week now aggravated the tight supply in the market, causing  price spikes that tugged at PTA values.

Spot PX prices surged to their highest level on record at $1,815/tonne (€1,289/tonne) CFR Taiwan and/or CMP on Wednesday, as demand from PTA producers surged following a force majeure declaration on PX supply by Japan’s JX Nippon Oil & Energy, according to ICIS.

Three of the company’s PX facilities, with a combined capacity of 950,000 tonnes, have been knocked down by a massive quake and tsunami that hit the northern part of the country on 11 March.

Meanwhile, spot PTA prices soared to a 16-year high of $1,500-1,517/tonne CFR (cost and freight) China Main Port (CMP) on Thursday, according to ICIS.

Prices will likely continue their uptrend in the coming weeks, as supply will become tight amid a slew of turnarounds in China, as well as in South Korea and Taiwan, market sources said. (Please see table below)

PTA output will be cut by about 264,000 tonnes, thereby cutting the requirement for feedstock PX by 177,000 tonnes, based on industry estimates.

“The shutdowns can calm down bullishness in PX prices, but will, meanwhile, exacerbate supply shortage of PTA,” said a major regional trader.

China’s Xianglu Petrochemical informed its customers on Wednesday that it would bring forward a 15-20 days of turnaround at its 1.65m tonne/year plant, in the southern  Fujian province, to the end of May, instead of the second half of the year. The company will cut supply to contract customers by half in June because of the shutdown, market sources said.

Yisheng Dahua Petrochemical now intends to shut its 1.5m tonne/year plant at Dalian in Liaoning province on 16 April. The new maintenance schedule was set half month early than its original plan, after “a thorough consideration”, said a company source.

Among the other PTA plants due for turnarounds in China next month are Fujian Jialong Petrochemical’s 600,000 tonne/year Xiamen plant, Mitsubishi Ningbo’s 600,000 tonne/year line, BP Zhuhai’s 500,000 tonne/year No 2 unit and Zhejiang Yuandong’s 600,000 tonne/year No 2 unit.

In Taiwan, Oriental Petrochemical shut its 400,000 tonne/year plant at Kuan Yin in Taoyuan on Wednesday – a day earlier than planned. The plant will undergo 10 days of maintenance.

In South Korea, Taekwang Petrochemical’s 1m tonne/year plant in Ulsan and Sam Nam Petrochemical’s 550,000 tonne/year No 3 plant will also be taken off line some time next month for maintenance.

A Chinese trader said that the PTA producers’ reaction to the tight PX supply and high prices “seems to be overdone”, adding that a margin exceeding $180/tonne can still be generated at current PX costs.

This was higher than the $153/tonne average margin recorded in 2010, he said.

Meanwhile, PTA demand is expected to strengthen in the coming months with around 2m tonnes/year of new downstream polyester capacities starting up.

Insufficient PTA supply might restrict polyester production during the traditional peak demand season in April-May, said a polyester maker.

PTA is primarily used in polyester production, with polyester fibre and yarn consuming over 75% of Asia's PTA output.

Regional PTA plants

($1 = €0.71)

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By: Becky Zhang
+65 6780 4359

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