China PTA to rise on healthy fundamentals despite weak PX

Source: ICIS News

2019/04/03

SINGAPORE (ICIS)--China’s domestic purified terephthalic acid (PTA) prices may gain further on the back of healthy fundamentals in spite of an expected weakness in feedstock paraxylene (PX) values; with the PTA-PX spread likely to widen further in the coming months.

Spot PTA prices rose to yuan (CNY) 6,600/tonne ($984/tonne) on 29 March, up 1.5% from the previous week, according to ICIS data.

Market gains are likely to continue as demand is strong from downstream polyester industry, while output losses from scheduled turnarounds in the near term will offset the expected supply increase from a new plant starting up this month.

Polyester plants in China posted on 29 March a high average operating rate of around 86%, with production rising since early February.

These polyester facilities may continue to keep production rates high amid rosy margins and low inventories, particularly those of polyethylene terephthalate (PET) and polyester stable fibre (PSF).

Demand for feedstock PTA also recently got a boost following a heavy capacity expansion in the downstream polyester industry, with more than 4m tonne/year capacity added between April 2018-March 2019.

In addition, downstream weaving factories are also running at high levels, market sources said, a further indication of strong demand for PTA.

Scheduled turnarounds at PTA plants from end-March to May, meanwhile, will result in an estimated supply loss of 640,000 tonnes.

China PTA plant turnarounds in March-May 2019

Company Location Capacity (tonnes/year) Shutdown Expected production loss (in tonnes)
Yisheng Dahua Petrochemical Dalian, Liaoning 3.75m One week from 25 March 70,000
Hengli Petrochemical Dalian, Liaoning 2.2m 15 days from  28 March 90,000
Hengli Petrochemical Dalian, Liaoning 2.2m 15 days in April 90,000
Tongkun Petrochemical Jiaxing, Zhejiang 2.2m 15-20 days from early April 120,000
BP Zhuhai Zhuhai, Guangdong 1.25m Three weeks from end-March 70,000
Formosa Ningbo Ningbo,Zhejiang 1.2m 15 days in May 50,000
Fuhaichuang Petrochemical Zhangzhou, Fujian 4.5m 15 days in May 150,000

Sichuan Shengda is due to start up its 1.0m tonne/year PTA plant in east China in April, but the facility may take some time to ramp up production and output will be mainly digested in the Sichuan province.

Current PTA inventories in China are at reasonable levels of about 1.2m tonnes, market players said.

Spot prices of feedstock PX, on the other hand, may come under pressure from increased supply with the expected start-up of Hengli Petrochemical’s massive 4.5m tonne/year capacity in Dalian.

One of Hengli Petrochemical’s two 2.25m tonne/year PX units is running at low rates, with output directly supplied to its downstream PTA plant via a pipeline, market sources said.

The second PX line is expected to come on stream within two months of stable operation of the first line, they said.

On 29 March, China’s PX import prices stood at $1,054/tonne CFR (cost & freight), up $4/tonne from the previous week, according to ICIS data.

An expected weakness in PX prices could further widen the PTA-PX spread, which in end-March stood at CNY1,029/tonne – higher than the typical gap of CNY700-800/tonne and nearly double the CNY550/tonne spread needed by PTA producers to break even.

Focus article by Sylvia Cai