11 January 2013 11:32 [Source: ICB]
The largest application for purified terephthalic acid (PTA) is in polyethylene terephthalate (PET) for the polyester industry, used to produce industrial and textile fibres, bottles, film and moulded product applications.
Asia added a total of 7.6m tonne/year PTA capacity in 2012, bringing the region's total PTA capacity to 51m tonnes/year. Meanwhile, downstream polyester capacity in Asia rose by 6.5m tonnes/year, or 12%, to 60m tonnes/year.
With the fast capacity expansion, run rates at Asia's PTA plants fell sharply to 79% in 2012, nine percentage points lower than 2011. PTA margins were running at an average of around $40/tonne below break-even levels for 10 consecutive months from March 2012.
Of the 7.6m tonne/year PTA capacity addition, 7.5m tonne/year was in China. As a result, the country imported 5m tonnes of PTA in 2012 up to November, a 15% fall.
Taiwan and South Korea, the two largest PTA exporters to China, were hit heavily. Producers were prompted to trim production to reduce margin losses from April. The average operating rate of South Korean PTA units was around 75-80% in November and December.
Asia spot PTA prices have been on a rapid downtrend since early May 2012, led by continual plunges in crude futures and China's lacklustre manufacturing activity. The start-up of a 1.4m tonne/year PTA plant in China in late May exerted additional downward pressure on prices. PTA prices hit $893-911/tonne CFR (cost & freight) CMP (China Main Port) in the middle of June, hitting lows last seen in September 2010.
PTA prices have since been on a half-year uptrend and reached a 10-month high in January 2013. Strong uptrends in feedstock paraxylene (PX) prices and tight PTA spot supply as a result of large-scale production cutbacks in Taiwan, South Korea and Thailand in the second half of 2012 are the main supports for prices.
Four new plant start-ups in China, with a total capacity of 5.9m tonne/year, in the second half of 2012 and the impending start-up of 5m tonne/year of PTA in China in early 2013 weigh heavily on market sentiment and prices.
PTA producers in Asia outside of China, worried about eroding margins, proposed a feedstock PX-linked contract formula with customers across the region, to substitute the current purely spot price-based formula.
Modern technologies produce PTA by catalytic liquid-phase oxidation of PX in acetic acid, in the presence of air, using a manganese or cobalt acetate catalyst.
The reaction is exothermic, producing water, which is removed in a solvent recovery system. Acetic acid from this is returned to the reactor together with the oxidation catalyst. The resulting PTA is purified in a crystalliser, where the unreacted xylene and water are flashed off.
Some plants have been modified to also produce isophthalic acid by substituting metaxylene for PX.
The oversupply of purified terephthalic acid in Asia is expected to worsen in 2013 as the ongoing massive capacity expansion in China exceeds demand growth from the downstream polyester industry, industrial sources say.
Asia's PTA capacity is expected to increase by 12m tonnes/year in 2013, which will outstrip expected polyester expansion of around 8.7m tonnes/year. Overall PTA operating rates are likely to fall further to 69% in 2013 with the 24% increase of capacity, despite 8% demand growth from the polyester sector. China will see five projects and 10m tonne/year of PTA capacity addition in 2013, increasing its total capacity to 38m tonnes/year by the end of 2013.
The country's PTA demand is estimated at around 28.5m tonnes/year in 2013, assuming demand growth stays at 8%.
The huge capacity expansion of polyester in China and India in 2013 will be able to partially absorb the additional PTA supply, but it is facing the same oversupplied situation.
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