China PTA supply to continue growing on good margins despite weak prices

Winnie Huang


SINGAPORE (ICIS)–China’s domestic supply of purified terephthalic acid (PTA) may continue growing on the back of good margins amid depressed crude values despite continued weakness in spot market prices, which hit a record low on 22 April.

But producers’ inventories have been piling up amid sluggish demand as most of the world is under lockdown amid the coronavirus pandemic, hitting demand for downstream textile products.

Chinese PTA plants’ average operating rate remained high at about 90%, ICIS data showed.

High production is mainly supported by healthy margins following crude-driven sharper falls in prices of feedstock paraxylene (PX).

The theoretical margins for PTA stood at around yuan (CNY) 72/tonne ($10/tonne) on 22 April, when domestic PTA prices fell below CNY3,000/tonne for the first time since ICIS started tracking the prices in 2007.

Production of PTA has been profitable since March 2020, following the crash in crude prices due to the price war between oil giants Saudi Arabia and Russia.

Domestic PTA supply will also be boosted when Xinjiang Zhongtai Chemical’s 1.2m tonne/year plant restarts in end-April after a month-long maintenance.

PTA prices in both the spot and futures market tend to closely follow movement in crude prices.

On 23 April, spot prices in east China rebounded along with crude, to settle at CNY3,089-3,218/tonne ex-warehouse (EXWH), up by CNY156-248/tonne from the previous day.

ICIS Editorial Chart goes here

In the futures market, the main PTA contract closed higher at CNY3,334/tonne, up by CNY176/tonne over the same period.

The May and September PTA contracts on 22 April shed 6%, hitting their maximum limit on daily movement, following a rout in crude prices.

Crude prices have been depressed due to a global supply glut and slumping demand amid the coronavirus pandemic, which started in China late last year.

On 20 April, the WTI May contract settled below zero for the first time ever, with the lowest level in the session at minus $40.32/bbl on heightened concerns over lack of oil storage space in the US.

Focus article by Winnie Huang

($1 = CNY7.07)

Photo: Production resumes at Shishi, a major textile industry hub in Fujian, China – 19 Apr 2020. (Source: Xinhua/Shutterstock)

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