By Malini Hariharan
The blog has been listening to some interesting presentations on the polyester chain at the Indian Petrochem - 2011 conference in Mumbai.
The global economic slowdown does not appear to have dampened prospects for polyester demand.
"Demand for polyester grew by 5.6m tonnes last year which was atypical; we all thought that growth in 2011 would be modest but we are again looking at a figure of over 4m tonnes," said Philip Gibbs, chairman of PCI Xylenes & Polyesters.
Global polyester production is likely to touch 60m tonnes this year and grow to around 80m in 2015, he estimated.
However, a rapid addition to capacity, especially in China, would drag down operating rates from around 80% to 70% during this period.
The industry will have to cope with oversupply for the next two to three years, he added.
Asia, led by China, India and Indonesia, will drive global growth.
Gibbs highlighted that Asia is moving away from the traditional polyester consumption pattern of relying on textile exports to the Americas and Europe for growth.
"Seventy five percent of what China produces stays within the country; the domestic market is a driver for polyester. China is only now getting going and has another five to eight years of growth. It still has to get the wider population buying polyester," he said.
Polyester is also expected to expand its share at the cost of cotton.
"Globally, fibre consumption is growing around 1.5times GDP; so if GDP expands by around 6% the world will need about 5m tonnes of additional fibre every year," estimated Rajen Udeshi, president of the polyester chain at Reliance Industries.
But cotton availability is unlikely to grow significantly as competing crops offered better value to farmers and also because food security is more critical for governments.
"So global cotton production is likely to remain in the 23-24m tonnes range and the incremental requirement will have to come from polyester. For this the world will need an additional 3.5m tonnes of purified terephthalic acid [PTA], almost 1.0-1.5m tonnes of paraxylene [PX] and 1.5m tonnes of monoethylene glycol [MEG] every year," he added.
However, an mentioned by the blog earlier what is worrying for players along this chain is the emerging imbalance as capacity additions in PX and MEG are lagging behind polyester and PTA.
PX availability is likely to be the biggest constraint.
"There are so many new PTA plants coming up in China; I have asked many of the companies if they are covered for PX and the normal answer is that everything is available for a price. But the answer is no as PX is sold on [long term] contractual basis," pointed out Udeshi.
What this means is that there is unlikely to be enough PX to run all the new PTA plants.
For MEG, all eyes are now on whether China's new coal-based projects based either on the methanol-to-olefins (MTO) or coal-oxalic acid-MEG routes are commercially successful.