Middle East shapes up as next battleground for Asia PTA

SINGAPORE (ICIS)–The Middle East is shaping up as the next battleground among Asian purified terephthalic acid (PTA) producers, which need to export excess volumes amid a strong capacity build-up in China and India, market sources said on Thursday.

“Outlets for Asian PTA cargoes are increasingly limited, as ex-importers such as China and India reduce their demand for import cargoes. This is mainly due to the new production capacities which these former importers have continually added,” a market observer said.

Producers in China and India are targeting the Middle East as a potential major market from next year onwards, industry sources said.

These plans put them at neck-and-neck competition with South Korean producers, which have traditionally been the primary suppliers to end-users in the Middle East.

Producers in South Asia would most likely have cost advantages in moving cargoes to the Middle East. Proximity between the two regions meant lower freight costs and faster shipping time, market sources said.

PTA production capacity in the Middle East is limited, compared with China’s 47m tonnes/year and India’s 6m tonnes/year, industry sources said.

The Middle Eastern producers include Arabian Industrial Fibers Co that has a 350,000 tonnes/year plant in Yanbu, Saudi Arabia, and Petkim Petrokimya that has a 105,000 tonne/year plant in Aliaga, Turkey.

Iran has two PTA plants with a combined capacity of 700,000 tonnes/year in Bandar Imam, operated by Shahid Tondgooyan Petrochemical Co (STPC).

Meanwhile, Oman International Petrochemical Industries Co (OMPET) plans to build a 1.1m tonne/year PTA unit in Sohar. The plant, which will use BP’s PTA technology, is expected to start up after 2018-2019.

In India and China, domestic market fundamentals have been weak and producers are saddled with high PTA inventory.

Domestic demand for PTA cargoes by downstream polyester makers have remained flat, with demand for their end-products such as fabrics and yarns not likely to increase by much in the near-term, market sources said.

Polyester exports from India to the traditional markets of the Middle East and Europe have slowed substantially this year, a source in south Asia said, resulting in higher inventory for end-products, as well as less demand for PTA feedstock.

Asia’s economic slowdown, especially in the major market of China, is dampening demand for PTA.

However, supply in the region continues to grow with new plants expected to start up in the near term, and more are in the pipeline.

In China, major producer Hengli Petrochemical is still planning for a fourth 2.2m tonne/year No 4 PTA line that will bring its overall capacity to 8.8m tonnes/year.

Hanbang Petrochemical is looking at starting up a 2.2 m tonne/year line by end-2015 or early-2016, while Sichuan Chengda’s 1 m tonne/year PTA line could come on stream by the end of the year.

In India, Reliance Industries started up in mid-September a 1.1m tonne/year No 2 line in Dahej, while JBF Industries plans to begin production at its 1.1m tonne/year unit in New Mangalore in March next year.

Focus article by Paul Lim

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