In the past two years, the Asian PTA (pure terephthalic acid) market has experienced a downward trend, with prices remaining low and volatile. Analysts expect the market to remain weak during the winter season, as demand for polyester, a key downstream product, continues to weaken. This is partly due to reduced demand in the textile sector, where many manufacturers have scaled back production, leading to lower consumption of PTA. Additionally, the price of paraxylene, a key raw material for PTA, is expected to rise, squeezing profit margins for producers and even causing some plants to operate at a loss.
The imbalance between rising raw material costs and stagnant downstream prices has left the PTA market in a difficult position. While PTA is widely used in industries such as chemical fiber, electronics, and construction—over 90% of global PTA goes into producing polyester (PET)—domestic demand in China remains a major driver. In China, 75% of PTA is used for polyester fiber, 20% for bottle-grade polyester, and 5% for film-grade applications. However, despite growing domestic demand, the supply side has expanded rapidly, leading to oversupply and falling prices.
Since the autumn of 2007, some textile markets failed to meet seasonal expectations, resulting in large stockpiles of finished goods and forced production cuts. This, in turn, led to a significant drop in demand for polyester filaments, which negatively impacted PTA demand. As a result, PTA prices fell compared to the same period last year, but profit margins shrank, with some companies suffering losses.
Mitsui and other major players have had to adjust their strategies, reducing production due to overcapacity and weak pricing. In Japan, domestic PTA prices fell further in October 2007, largely due to tightened investment controls in China. The pressure for price reductions is expected to continue, increasing risks for new investments in the PTA industry. Some plants have been forced to halt or reduce operations.
Mitsui Chemicals recently announced a 20% reduction in PTA output at its facilities in Thailand and Japan, while Indonesia’s plant remained unaffected due to strong local demand. Mitsubishi also cut production at its overseas sites in Indonesia and South Korea, and shut down a newly commissioned 600,000-ton PTA plant in Ningbo, China. Meanwhile, its Matsuyama plant in Japan continued normal operations, with ongoing monitoring of market conditions to decide on future shutdowns.
Looking ahead, the company plans to launch a new PTA plant in India by mid-2008. At a forum hosted by the China Development and Reform Commission and the China Chemical Fiber Industry Association, it was noted that China’s domestic PTA demand has been steadily rising, reaching 13.4 million tons in 2006, 14.8 million tons in 2007, and projected to hit 16 million tons in 2008. However, the growth of domestic PTA capacity has outpaced demand, leading to declining imports.
China's PTA imports dropped from 6.8 million tons in 2006 to 4.8 million tons in 2007, and are expected to fall further to 3 million tons in 2008. Import dependency has decreased from 51% in 2006 to 32% in 2007, and is forecasted to reach 18.8% in 2008. From 2008 to 2010, capacity expansion will continue, with projects like Fujian Shishi, Yizheng Chemical Fiber, and Otsuka set to come online. By 2010, total PTA capacity is expected to reach 19.89 million tons, while consumption will be around 16.7 million tons. With an operating rate of 80%-90%, China's PTA supply is expected to meet domestic demand.
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