Purified Terephthalic Acid (PTA) markets are currently experiencing irrationally strong price hikes, impacting the polyester industry. The textile industry, a major consumer of polyester fibers, relies heavily on PTA in polyester production. Polyester constitutes the primary end-use segment of PTA, accounting for 61% of total global consumption. The increase in PTA prices has led to a corresponding rise in the price of Polyester Staple Fibre (PSF), and the polyester industry is witnessing significant activity.

In 2007, global PTA consumption was 37 million tons, and it is anticipated to grow at 6% per annum, reaching over 50.5 million tons by the end of 2012. Despite facing surplus capacity, the industry is experiencing growth due to massive capacity expansion in China and additional capacity in the polyester sector. The expansion of polyester capacity in countries like India and China is expected to outpace the growth of PTA capacities, making sourcing PTA challenging in 2011 and likely to continue in the next 2-3 years. However, PTA producers are expected to enjoy healthy margins during this period.

Global PTA manufacturers are planning for higher plant utilization capacity, with predictions indicating a rise to 90% in the current year. Asian PTA production is primarily concentrated in India, China, the Middle East, and Thailand. Asian PTA production capacity was 40 million tons in 2010, with growth expected to accelerate from 5-6% during 2007-10 to around 18% by 2012. In 2013, a decline of 8% is projected.

The strong demand for PTA in China has led to price bubbles in the market. Market demand for PTA is expected to grow by 2 million tons in the current year, creating a tight gap between demand and supply. Production capacity is projected to increase by 6 million tons in 2012, reaching 21.74 million tons. China is expected to comprise 50% of the Asian production capacity, accounting for 80% of the global capacity. Industry experts suggest that running plants at a maximum utilization capacity of 92% may not be sustainable. China may need to import more than 5 million tons of PTA per year until 2013.

Buyers in the Indian market are also facing challenges regarding PTA availability. Plants are running at a maximum utilization capacity of 75%, whereas to meet growing demand, they need to operate at 95% capacity. Meeting this demand poses a significant challenge, but the strong market potential for the polyester industry is expected to boost PTA demand.

Polyester fibres shore up PTA demand:

The capacity utilization of PTA depends on the downstream growth of polyester industry, especially in the textile industry. Polyester fibres constitute a big share in the global output, and PTA is primarily used in making polyester fibres. In Asian countries around 80% of the PTA is used for polyester fibre making, 15% for polyethylene terephthalate (PET), and 5% for making film and other plastics. A report presented at the Asia Petrochemical Industry Conference, 2010 states that India is Asias second largest consumer of PTA next to China with a consumption of 16-18% during 2007-2009.

PTA industry in 2013:

Industry players expect prices to crash down after a steep increase. They believe the situation to reverse in 2012, and 2013 once the plants become fully operational. Asian PTA plants will face tough competition in 2013, amidst strong PTA consumption growth, and extensive expansion. A decline in the overall operating rates may give rise to the situation.

In the coming couple of years, 14.5 million tons new PTA capacity or 10 new world scale PTA plants is expected to come. This will increase the Asian PTA capacity to 52.5 million tons by 2013. Of this, 66% capacity will be in China, 14% in Taiwan, 11% in India, and 8% in Middle East (Source: icis.com).

Global recession has stopped new projects and investments. With gradual recovery in the Asian markets during 2009 and 2010, fresh investments are expected. Asian producers will attempt to strengthen their competitive advantage.


References:

  1. icis.com
  2. cxtextiles.com
  3. prweb.com