Asia PTA supply to lengthen in H2 on India, China plant start-ups

13 June 2018 07:51 Source:ICIS News

SINGAPORE (ICIS)--Supply of purified terephthalic acid (PTA) in Asia is expected to lengthen in the second half of 2018 as new capacities will start up in the major markets of India and China, amid a slowdown in demand.

Major plants will have resumed production after unplanned outages to ease the current global supply tightness that has been driving up Asian prices, while demand typically weakens in the third quarter.

Asian PTA prices may start to come under pressure as fresh supply will hit the markets when new major regional plants start production in the third quarter.

"Market sentiment is currently pessimistic about the outlook, however, this can quickly change if we see a sudden uptick in downstream demand," a China-based producer said.

In India, JBF Group’s 1.25m tonne/year PTA unit in Mangalore is expected to start up in the third quarter, although the schedule is still fluid, according to several market participants.

In China, Fuhaichuang Petrochemical, formerly known as Dragon Aromatics (Zhangzhou), is planning to resume operations at its complex in the third quarter this year after a prolonged shutdown.

Its petrochemical complex in Zhangzhou has a 4.5m tonne/year PTA plant, which is comprised of three 1.5m tonne/year lines, two of which have been in operation since end-2017. The company is likely to restart the third line once smooth operations at its upstream paraxylene (PX) unit at the site is achieved, market players said.

In Europe, Indorama Ventures Portugal plans to start up in July an idled 700,000 tonne/year PTA unit in Sines. Thailand-based Indorama Ventures Ltd acquired the plant from Portuguese Artlant PTA in late 2017.

All these factors should see the narrowing of the price gap between China’s import and domestic markets as early as next month, after widening steadily from March to May.

As of 12 June, the gap stood at $96/tonne, down from the peak of about $111/tonne on 30 May.

Asia’s PTA prices are currently steady at high levels, with regional end-users preferring to procure cargoes on a need-to basis and were not keen on building inventories.

Future movement will depend on market conditions in the downstream polyester industry.

The wide price gap in China’s import and domestic markets have been deterring Chinese buyers from tapping the international spot market for supplies since March, while demand was healthy, especially in the downstream polyethylene terephthalate (PET) markets.

Tight global supply in the first half saw Asian producers shipping out cargoes to the Middle East, as well as Europe, which was hit by unplanned outages in Belgium and Poland in April.

In Europe, BP Chemical on 15 April declared a force majeure at its Belgium PTA unit, and declared a second force majeure on 17 May; while PKN Orlen on 23 April declared a force majeure at its Wloclawek PTA unit in Poland which was subsequently lifted on 2 May, with spot cargoes from the plant limited until after a planned maintenance in September/October 2018.

Within Asia, the southeastern region has had PTA plant outages and had to procure cargoes from the northeast in the past two months.

Regional supply tightened further with the unexpected shutdown of Hanwha General Chemical’s 700,000 tonne/year PTA unit in Daesan, prompting a force majeure declaration on 21 May.

In the first half of 2018, strong growth in demand in the downstream polyester markets in Asia, particularly China, supported the rally in PTA prices amid tight supply.

Downstream polyester markets were enjoying positive margins, keeping demand for feedstock PTA healthy.

In the key China market, operating rates at polyester units were higher compared with the previous year.

The country's PTA production losses in January-June 2018, on the other hand, were estimated at around 1.34m tonnes due to planned and unplanned outages.

Asia’s PTA producers were largely enjoying healthy margins, on the back of steady demand growth in the downstream polyester markets. Firmer upstream energy and feedstock PX prices have also buoyed up PTA prices.

In January to May 2018, Brent crude traded at $66.92-76.16/bbl, up by about 25% year on year, while PX prices were at $938-994/tonne, representing a 15% increase over the same period.

Focus article by Samuel Wong

Picture: Inside a textile factory in Jiangsu province, China. Textiles are the main downstream of purified terepthalic acid (PTA). (Source: Imaginechina/REX/Shutterstock)

By Samuel Wong