Over the past two years, the Asian PTA (pure terephthalic acid) market has experienced a consistent downward trend. Analysts expect that the market will remain weak during the winter season, with prices continuing to fluctuate at lower levels. One key factor is the weakening demand for winter apparel, which has led to potential large-scale production cuts in polyester factories, thereby reducing the demand for PTA. Additionally, the price of paraxylene, a major raw material for PTA, is anticipated to rise further, squeezing the profit margins of PTA producers and potentially making production unprofitable.
With limited market demand and rising upstream costs, while downstream polyester prices remain stable, the PTA market shows no signs of recovery. PTA is widely used across various industries, including chemical fibers, light manufacturing, electronics, and construction. Globally, over 90% of PTA is used to produce polyethylene terephthalate (PET), which is essential for textiles, bottles, and films. In China, about 75% of PTA is directed toward polyester fiber production, 20% for bottle-grade PET, and 5% for film-grade applications.
Market analysts noted that since the autumn and winter of 2007, many local textile markets failed to thrive during peak seasons, leading to significant product backlogs. As a result, textile companies had to cut production or shut down operations, causing a sharp drop in demand for polyester filaments. This, in turn, led to increased inventory in chemical fiber plants and forced production loads to be reduced. Consequently, the demand for PTA as a raw material declined, contributing to a noticeable price drop compared to the previous year, although profit margins shrank significantly, with some companies suffering losses.
Mitsui and other major players have also been affected by the oversupply in the Asian PTA market, which began after numerous new and expanded projects came online starting in 2006. This led to falling prices, prompting Mitsui to implement production cuts. By October 2007, domestic prices in Japan fell further, largely due to China’s tighter investment controls. Analysts predict increasing pressure on pricing, which could pose risks for investors in the PTA industry. Some production facilities have been forced to reduce output or even halt operations.
Mitsui Chemicals recently announced plans to cut PTA production by 20% at its plants in Thailand and Japan, while its Indonesian facilities continue full operations due to strong local demand. Meanwhile, Mitsubishi Chemical Corporation also reduced PTA output in Indonesia and South Korea. In November 2007, it shut down a newly commissioned 600,000-ton PTA plant in Ningbo, China, but maintained normal operations at its Matsuyama facility in Japan. The company continues to monitor market trends to decide when to suspend operations at other units. Additionally, its new PTA plant in India is expected to start operating in the second half of 2008.
At a forum hosted by the China Development and Reform Commission and the China Chemical Fiber Industry Association in mid-November 2007, it was reported that China's domestic PTA demand has been steadily increasing. Consumption reached 13.4 million tons in 2006, rose to 14.8 million tons in 2007, and is projected to reach 16 million tons in 2008. However, domestic PTA capacity growth has not kept pace with this demand.
As supply increases domestically, China’s PTA imports have been declining. In 2006, imports stood at 6.8 million tons, dropping to 4.8 million tons in 2007, and are expected to fall further to 3 million tons in 2008. Import dependency dropped from 51% in 2006 to 32% in 2007, and is forecasted to decrease to 18.8% in 2008. From 2008 to 2010, China’s PTA capacity expansion is expected to accelerate, with several new projects coming online, including Fujian Shishi, Yizheng Chemical Fiber, and Otsuka. By 2010, total domestic PTA production capacity is expected to reach 19.89 million tons, while consumption is estimated at 16.7 million tons. With an operating rate of 80-90%, China’s PTA supply should meet market demand.
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