Extra China PTA capacity means tougher times for Europe - consultant

11 March 2014 11:09 Source:ICIS News

NexantAMSTERDAM (ICIS)--Huge volumes of purified terephthalic acid (PTA) capacity being added in China will lead to chronic oversupply, low operating rates, and increased competition for European exporters, a Nexant consultant said on Tuesday.

Around 17m tonnes of new PTA capacity is forecast to be added in China from 2014 to 2017, leading to “terrible” margins,  low operating rates and periodic plant shutdowns of even the largest plants, according to Stewart Hardy, global manager – petrochemical market dynamics, for the consultancy.

Speaking at the second ICIS polyethylene terephthalate (PET) conference, Hardy described the Chinese expansion plans as “quite remarkable”, adding: “They will continue to build these plants. Looking at other markets such as polyvinyl chloride (PVC) shows that China continues to build and import even if margins and operating rates are low.”

Hardy forecasts that operating rates for Chinese plants will be only around 60% from 2014.

European PTA exporters will face increasing competition from Chinese and South Korean producers targeting the Middle East. China is already exporting around 10,000 tonnes/month to Saudi Arabia and India and more cargoes are planned for Oman and the United Arab Emirates (UAE), said Hardy.

“These markets – previously dominated by Europeans - are now being contested by South Korea and China. The Middle East has become the main battleground: in the last 6-12 months we’ve seen European volumes falling and South Korean and Chinese volumes increasing rapidly.”

He said that there is nothing to suggest a strong return to profitability for PTA producers.

“In Asia their mind set is that market growth will save them. In Europe no-one expects strong underlying growth and there is not much sign of laggard plants being taken out.”

By Will Beacham