China PTA market to stay bullish near term on tight supply

SINGAPORE (ICIS)–Spot purified terephthalic acid (PTA) prices in China are expected to be stable-to-firm as import supply will likely remain tight in the near term.

The benchmark CFR (cost and freight) CMP (China Main Port) price was assessed on 31 July at $635-650/tonne, according to ICIS data.

“There are enquiries from end-users and buyers for import cargoes and this could go on for a while more,” a key seller of import cargoes said.

PTA traders have re-entered the market in recent weeks, seeking to fix back-to-back cargoes between producers and buyers.

Sellers in Asia had previously disposed of large-quantity spot volumes to regional buyers and were short of material to send to China, with some holding out for higher prices before confirming deals.

PTA producers in Thailand and South Korea are prioritising their domestic market, where cargoes are currently fetching good prices, thereby resulting in fewer spot volumes available to China.

“Sellers are juggling between sending cargoes to domestic markets as local prices are still profitable, as well as sending volumes to China when opportunities arise,” a northeast Asian trader said.

Buyers in China have remained engaged in spot discussions with sellers in spite of the rising prices, but are wary of confirming large spot volumes.

Buying indications this week were quoted below the fixed price offers of $650-655/tonne ex-CMP and CFR CMP by key sellers.

A major south Asian producer was heard to have fixed large monthly PTA volumes to China in the third quarter but this could not be confirmed.

There are also ongoing discussions for Indian-origin cargoes to move to China, market sources said.

In China, domestic producer Hanbang Petrochemical resumed high operating rates at its 2.2m tonne/year plant from the weekend of Jul 23 and is further ramping up production at the unit. Market sources said the company has restarted its idled 600,000 tonne/year No 1 line but this could not be confirmed.

Demand remains stable from the downstream polyester markets.

Meanwhile, Jialong Petrochemical restarted its 600,000 tonne/year PTA line in Shishi on the weekend of 22 July after nearly two weeks of shutdown from 10 July.

Major producer Hengli Petrochemical is also expected to achieve stable operations at its Dalian-based 2.2m tonne/year No 1 PTA line in the first half of August. The plant has been shut for maintenance since 20 June.

But futher turnarounds at other Chinese plants in the coming months may keep domestic PTA supply tight.

Market sources said that Hengli Petrochemical is looking at shutting down its 2.2m tonne/year No 2 PTA line for a two-week turnaround, when its No 1 line with the same capacity restarts. This information could not be confirmed by the company.

Jiangsu Sanfangxiang Group’s two 1.2m tonne/year PTA units and Shenghong Petrochemical’s 1.5m tonne/year plants are also expected to be shut for turnaround sometime in the third quarter.

In the case of Shenghong Petrochemical, it has informed its term customers about a reduction in contract volumes from end-August/early-September, market sources said.

Jiaxing Petrochemical (Tongkun) could also be planning a turnaround at its 1.2m tonne/year PTA line, possibly in the fourth quarter, when its new 2.25m tonne/year PTA line is due to start up.

Meanwhile, PTA futures inventory in China, based on warehouse receipts in the futures market, were at 709,105 tonnes on 28 July, up from 705,060 tonnes in the previous week but has remained a historic low level, firmly supporting prices.

Focus article by Paul Lim

Pictured above: A worker at a textile factory in China. The textile industry is a major downstream sector for purified terephthalic acid (PTA). (Photographer: Zhengyi Xie/REX/Shutterstock)