China PTA market enters attrition war as end-users buy local USD cargoes

17 October 2016 09:44 Source:ICIS News

Focus article by Paul Lim

(recasts third paragraph for clarity)

SINGAPORE (ICIS)--China’s purified terephthalic acid (PTA) market is seeing a war of attrition as local producers fiercely compete with imported material to preserve their market share.

Domestically-produced PTA is being offered at attractive prices against import cargoes from Asian producers in South Korea or Japan in Chinese producers’ bids to prevent external-origin cargoes from eating into their market share.

End-users in the polyester industries snapped up two ex-China Main Port (ex-CMP) purified terephthalic acid (PTA) cargoes sold by major domestic producer Yisheng Petrochemical.

The rapid sale on Monday morning has bucked the recent trend of thin trades, when end-users were holding out for better prices on unstable upstream energy prices in the crude oil and feedstock paraxylene (PX) markets.

Two yarns producers bought up 3,000 tonnes of prompt-loading PTA at $603/tonne ex-CMP on Monday morning, to be delivered from warehouses in Chinese main port Dalian.

CFR (cost & freight) CMP prices have been on a gradual upward trend since Sep 1, climbing $10/tonne to $610/tonne CFR CMP on 14 Oct. This is in line with upward climbs in feedstocks naphtha and paraxylene (PX).

PTA is a key feedstock in the production of polyester products such as yarns, fibres and bottle chips and constitutes close to 90% of feedstock costs.

It is in turn produced from aromatic PX.

The attrition battle is expected to continue in the mid-term, until more plants shut down in the ongoing industry-wide consolidation of production capacity.

Already, the market is expecting more production capacities to cease in 2017. This is especially so for units with smaller economies of scale and are not integrated into the entire polyester supply chain.

For example, those who do not have PX feedstock fed in through affiliated producers and have to purchase PX from the merchant market.

Those which do not have downstream captive units to divert their PTA supply too are also expected to be in higher-risk positions.

By Paul Lim