China PTA plants to maintain high run rates pre-G20 summit

SINGAPORE (ICIS)–Purified terephthalic acid (PTA) producers in China are expected to maintain high operating rates at their facilities in June and July to build up stocks ahead of the G20-related shutdown of petrochemical plants, market sources said Tuesday.

The plants are currently running at an average rate of about 70%, which will likely be kept in the near term, they said.

Downstream polyester units are no longer expected to reduce production from the second half of June – foregoing their usual practice when demand goes on a seasonal lull – to have sufficient inventory during the expected shutdowns in late August to early September, industry sources said.

The G20 summit will be held in Hangzhou City, Zhejiang province in eastern China on 4-5 September.

Most petrochemical plants within the 300-kilometre (km) radius of the G20 meeting locations are being required to shut operations completely about two weeks before the actual summit, to ensure better air quality in Hangzhou City, where G20 leaders will discuss a host of issues facing the global economy, including climate change.

“Demand for finished polyester products should continue throughout August and September,” said a source at a major PTA producer in China.

“This means that PTA and polyester producers would continue running at high rates to stock up on PTA and fibre/yarns/PET [polyethylene terephthalate] chips inventories in July and August before they shut,” the source said.

At Zhejiang province’s industrial hub of Ningbo, polyester producers are expected to continue purchasing PTA cargoes between June and August to avert any tight supply arising from the expected plant shutdowns in the fibre intermediates chain, industry sources said.

“While some polyester producers have started lowering run rates, including major polyethylene terephthalate (PET) bottle producers in east China, the extent of reduction is limited, compared to the end of the peak season in previous years,” a Singapore-based industry observer said.

No turnaround is scheduled for Chinese PTA plants in June and July, industry sources said.

Among PTA producers with facilities in eastern China, Yisheng Petrochemical is running its units in Ningbo plants at high rates, and has decided to delay the units’ turnaround schedule to August-September.

The company’s three Ningbo PTA facilities with a combined capacity of 5.05m tonnes/year are among the petrochemical plants being required to completely shut down ahead of the G20 summit.

Tongkun Group has delayed the shutdown of its 1.5 m tonne/year PTA facility in Jiaxin, also in Zhejiang province, to August-September, in line with the stipulated shutdown period for most petrochemical plants in Ningbo.

In northeastern Liaoning province, Yisheng Petrochemical’s PTA plants in Dalian are also running at full capacity. These units may not be affected by the mandated shutdown as they are located at a considerable distance to Zhejiang province.

Hengli Petrochemical’s three major production lines in Dalian are currently running at full capacity.

Most PTA producers are checking if their downstream customers are affected by the shutdown so they can plan their production accordingly, and prevent any strong build-up in supply that could weigh down on prices, industry sources said.

In Jiangsu, another northeastern province of China, Shenghong Petrochemical’s 1.5m tonne/year PTA unit in Lianyungang is currently running at high rates, and is due to shut for two weeks around the time of the G20 meeting, in line with production stoppage at downstream polyester units.

Hanbang Petrochemical’s PTA production lines at Jiangyin in the same province, meanwhile, are expected to run at low rates at that time. It has two 1.1m tonne/year units and a 600,000 tonne/year unit at the site.

Meanwhile, overall supply in the Chinese market will get a boost in September with the expected delivery of physical PTA cargoes under futures contracts, industry sources said.

Focus article by Paul Lim

Top image: Yarn production at a textile factory in Jiangsu, China. The textile industry is the main downstream of purified terephthalic acid (PTA). (Source: Imaginechina/REX/Shutterstock)