FocusAsia PTA makers seek lower July PX offtake to stem losses

13 June 2012 04:55  [Source: ICIS news]

By Bohan Loh

SINGAPORE (ICIS)--Purified terephthalic acid (PTA) makers in Asia are seeking to reduce offtake volumes of high-priced feedstock paraxylene (PX) under their July contracts to stem losses, market sources said on Wednesday.

Oriental Petrochemical Taiwan Co (OPTC) and China American Petrochemical Co (CAPCO) have sent requests to their PX supplier in Taiwan - CPC Corp - for minimum lifting of contract cargoes for July, according to trading sources.

Officials from OPTC and CAPCO declined to comment when contacted by ICIS.

OPTC has shut its 400,000 tonnes/year T9 PTA unit in Taiyuan on 10 June for a week-long maintenance, market sources said.

CAPCO, on the other hand, took its 250,000 tonne/year PTA facility in Kaohsiung off line on 11 June for a 20-day turnaround because of poor market conditions,  they said.

Asian PTA producers have largely been incurring losses since end-October 2011 because of soaring costs of feedstock PX, according to ICIS data.

There had been some cutbacks in PTA run rates during the first quarter of 2012 but PX will remain in tight supply with huge new PTA projects starting up this year.

In China, greenfield PTA maker Hengli Petrochemical has deferred part of its contracted July shipments because of delays in construction of its ship berthing port at its Dalian project site, according to a source familiar with the matter.

“Hengli is still receiving part of its contracted cargoes via a small jetty that can allow a vessel to discharge 5,000 tonnes [of PX] every two to three days,” the source said.

The company expects to complete construction of six jetties at the site by September-October, when its two PTA units with a combined nameplate capacity of 4.4m tonnes/year are due to start up.

Meanwhile, another Chinese PTA producer Jiaxing Petrochemical had also deferred PX shipments of up to 40,000 tonnes in June because of delays in the start-up of its new 1.5m tonne/year project in Zhejiang province.

Deferments in contract shipments, coupled with expectations of further reduction in PTA run rates, will likely see July and August to be in long supply of PX, traders said.

“The length in supply might even extend into the September shipment month,” a market source said.

Spot PX prices hit a fresh 19-month low in the week ended 8 June at $1,231-1,233/tonne (€985-986/tonne) CFR (cost and freight) China Main Port (CMP), following plunging Brent crude futures amid worries over the unfolding eurozone debt crisis.

On Wednesday morning, bids for August shipments were at $1,150/tonne CFR Taiwan/Ningbo/Dalian, but no offers were heard.

 In other parts of Asia, PTA makers are also feeling the squeeze in margins, prompting production cuts.

In South Korea, Samsung Petrochemical has taken its 450,000 tonne/year No 2 plant at Ulsan off line on 7 June for 9-10 days of maintenance, while Taekwang Petrochemical is mulling cutting run rates at its 1m tonne/year PTA unit in Ulsan to 75-80% of nameplate capacity in June-July from 100% currently.

In Taiwan, Formosa Chemical and Fibres Corp (FCFC) is considering shutting down its 400,000 tonne/year PTA unit in Loong-der, a company source said. The company is expected to come to a decision within the week, he added.

($1 = €0.80)

Additional reporting by Becky Zhang

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Bohan Loh
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