Global overcapacity of purified terephthalic acid (PTA) is posing a threat to the profitability of polyester, which is the main downstream product of monoethylene glycol (MEG), the CEO of MEGlobal said on 30 March.
“PTA capacity across the globe has increased way beyond what a civilised market can absorb. That is creating a lot of stress on profitability for polyester,” Ramesh Ramachandran told ICIS on the sidelines of the International Petrochemical Conference (IPC), run by the American Fuel & Petrochemical Manufacturers (AFPM).
“That is the one area where the industry has to sort itself out,” Ramachandran said.
Polyester, which is 80-85% PTA, accounts for 68% of global MEG consumption, while polyethylene terephthalate (PET) has a 25-28% share of the total, he said.
When PTA prices fall, polyester often follows. For polyester producers, many of which are back integrated into PTA, declining prices would squeeze margins if the other polyester feedstock MEG remains firm.
“For MEG, everybody realises that once it reaches the $910-915/tonne price range, there was no way it’s going below that. It is below cash cost for some people, so the issue clearly is on the other derivative side,” said Ramachandran. “PTA is tremendously oversupplied, so our customers like the polyester producers, don’t want to produce in a downward PTA market,” Ramachandran said, describing the capacity addition in the PTA market as “reckless”.
While demand for polyester is healthy and even expected to substantially increase amid growing downstream applications, a volatile PTA market could deter production. In recent weeks in Asia, tumbling PTA and paraxylene (PX) markets drove down the prices across the aromatics chain, including MEG.