Northeast Asia PTA producers shut plants on poor margins

03 November 2011 14:55  [Source: ICIS news]

SINGAPORE (ICIS)--Two northeast Asian producers have shut down terephthalic acid plants because of poor margins and soft demand, sources said on Thursday.

South Korea’s Samnam Petrochemical shut its 350,000 tonne/year No 1 qualified terephthalic acid (QTA) plant on 28 October because of the unfavourable market situation, a company source said. The company also planned to prolong the shutdown of its 350,000 tonne/year No 2 purified terephthalic acid (PTA) unit, which went off line on the same day as a result of a mechanical outage.

On 25 October, Taiwan’s China American Petrochemical Co (CAPCO) shut its 250,000 tonne/year No 2 PTA unit because of concerns about poor margins.

“Given the November Asia contract settlement for paraxylene (PX) at $1,500/tonne (€1,095/tonne) CFR Asia, the current spread between PX and PTA is not enough to cover our production cost,” said a CAPCO source.

Asian PTA spot prices fell to $1,075–1,105/tonne CFR China Main Port (CMP) on Thursday’s close, down by $55–60/tonne from the previous week amid bearish sentiment, according to ICIS.

The spread between feedstock PX costs and PTA prices has narrowed to $70–100/tonne, while production costs for PTA is estimated at around $150–200/tonne, the producer said.

One tonne of PTA is produced by 0.67 tonne of PX.

“We are making [a] loss now. Demand is so poor in China,” said the Samnam source.

A major regional trader said: “Producers’ efforts to stabilise prices could do little to stem the downtrend."

He added that PTA prices are more affected by demand and the futures market, rather than the supply side.

The overall sales-to-output ratio of most of China’s polyester yarn plants declined to 50–70% this week, from 100–120% early last week, according to ICIS.

Sharp falls in feedstock PTA prices and soft demand from textile factories at the close of the demand season exerted huge downward pressure on polyester prices, market sources said.

($1 = €0.73)

By: Becky Zhang
+65 6780 4359

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