By John Richardson
THE last 18 months has been stellar for the polyester chain thanks to tight supply upstream in paraxylene (PX) and purified terephthalic acid (PTA), record-high cotton prices and a booming economy in China.
But all good times must come an end if our worst fears about China come true.
The longer-term direction of cotton prices seems hard to read. Over the next six months, however, increased output threatens polyester growth.
Separate from the overall picture, the biggest losers over the next few years might be the PTA players, according to a new report by Kunal Agrawal, Singapore-based chemicals analyst with BNP Paribas.
"In 2011-14, we see downstream PTA capacity expansion in the vicinity of 14m tonne/year, with significant capacity expansion in China, India and Taiwan," he writes.
Due on-stream in China this year are Zhejian Yisheng's 1.5m tonne/year plant, 900,000 tonne/year by SanFangXiang and the 2m tonne/year Xinaglu facility. Tonkgun is scheduled to commission a 1.5m tonne/year plant in 2012.
"While this creates strong demand for PTA's upstream feedstock - PX, where we see limited capacity expansion on PX in 2011-13 with new capacity expansions totalling 3.03m tonne/year until 2014.
"Key projects are S-Oil's 900,000 tonne/year expansion in 2Q11 and Reliance Industries' 1.25m tonne/year Jamnagar project in 2012.
"PTA capacity expansion ahead of PX expansion would mean stronger demand and
utilisation for PX, while PTA utilisations and margins could suffer from oversupply.
"PX utilisation rates in 2010 averaged 78.5%, and we expect this to improve to 83% by
"On the other hand, we see PTA expansions exerting a downward pressure on
utilisation rates. These we estimate could move from an average of 82.7% in 2010 to 75% by 2014."
Wouldn't it be nice if someone, anyone, had a plan?