China’s Polyester Crisis: The Global Implications

Business, China, Company Strategy, Economics, Fibre Intermediates

ChinaPTAJan-July2014

By John Richardson

EVERYWHERE you turn it looks bad in China, especially in the polyester value chain.

“So has it always been in polyester. Because of its ownership structure, capacities up and down the chain are often out of sync,” said an industry observer.

“Hence, the current big overhang in purified terephthalic acid (PTA) capacity in China, along with a shortage of paraxylene (PX)  feedstock, is nothing new. The PTA producers are often not integrated all the way through to PX,  and so nearly always misjudge the timing of their expansion. The same happens in  PX for time to time.

“Also in PTA and in PX, capacity is often added ahead of demand, but demand pretty quickly catches up. In a couple of years in China, we might well be back to normal.”

Sorry, no, we respectfully disagree.

Let us look at the data, first of all. This indicates the scale of the supply overhang in PTA. According to ICIS Consulting:

  • China’s PTA capacity totalled 31m tonnes/year in 2013 against real consumption of 27.8m tonnes.
  •  In 2014, capacity is forecast to rise to no less than 43.7m tonnes/year, with consumption at just 29.5m tonnes (real consumption is demand adjusted for inventory distortions).

This historically big overhang might have been fine if China’s real economic growth rate was still close to 10% per year. But this is no longer the case.

We have entered a period of  lower growth and the kind of macroeconomic uncertainty that most of us have never experienced before.  This applies both to China and the rest of the global economy.

Returning to the data, the chart above shows us that:

  • China’s PTA imports declined to 833,000 tonnes in January-July 2014 compared with 1.75m tonnes during the same period last year.
  • Meanwhile, exports have risen to 272,000 tonnes from 46,000 tonnes.

This dramatic shift in trade flows has occurred despite low operating rates in China. The country’s PTA plants have been running at operating rates of around 60% for several  months.

What does all of this mean for the global PX-PTA industry?

This will be one of the key themes of our free webinar on Tuesday 9 September – China Economic Transformation 11.

Please click here to register  for one of our two sessions in the European/Americas and Asian time zones.

PREVIOUS POST

China Exceeds US 20th Century Cement Output In Just Two Years

28/08/2014

By John Richardson CHINA produced more cement in 2011 and 2012 than the US produ...

Learn more
NEXT POST

China Will Not Shut Down. It Will Instead Run Harder.

31/08/2014

By John Richardson EVERY $10 decline in the iron ore price knocks more than $2bn...

Learn more
More posts
Why a hard look at the data show China has not seen a V-shaped recovery
06/08/2020

          Note: All the data comparisons below are year-on-year By John Ric...

Read
China moves closer to Iran as tensions with the US build: Implications for petrochemicals
02/08/2020

By John Richardson Opinions and emotions and can shape how we interpret data, but, as we all know, o...

Read
China polyolefins market H1 review: so far so good, but beware of the risks ahead
30/07/2020

By John Richardson ALL looks fine in the polyolefins world. The Old Normal appears to have reasserte...

Read
Polyethylene market recovery could be threatened by slower China crude buying, weaker economic growth
28/07/2020

By John Richardson EVEN by China’s standards, where just about every number is eye-wateringly larg...

Read
Why the polypropylene industry must switch from volumes to value
26/07/2020

By John Richardson EVERYONE knows about the oversupply in the polyethylene (PE) market as it has bee...

Read
China consulate closure underlines long-term split with US, potential big shift in petchems trade flows
23/07/2020

The views in this blog post are, as always, my personal views and do not reflect the views of ICIS. ...

Read
China’s real GDP could have been negative in Q2: What this may mean for PP
22/07/2020

By John Richardson CHINA’S official GDP growth of 3.2% for Q2, which was announced last week, may ...

Read
Iran and China new deal could hasten Belt & Road Initiative petrochemicals self-sufficiency
19/07/2020

By John Richardson ONCE AGAIN, please don’t say I didn’t tell you. A proposed new investment and...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more