G20 Summit Impacts on Chinese Polyester Supply Chains

On 4-5 September the G20 will hold its first meeting in China.  Hangzhou, Zhejiang will serve as the host city for G20 member countries as well as invited guests from Chad, Egypt, Kazakhstan, Laos, Senegal, Spain and Singapore.  To control pollution the government is restricting production in several petrochemical facilities in a region including Ningbo and Shanghai.  This report examines the impact of this policy on the polyester chain.

The Impact on PTA production appears to be limited to about 5,270 ktpa.  Most plants will use outages to conduct annual maintenance and so the actual impact on PTA supply will be lessened.  Reportedly, Zhejiang Yisheng and FCFC will not have to shut or reduce production during the summit.  Later in September FCFC in Ningbo will conduct a scheduled outage for one week.  Ningbo Mitsubishi, which has been shut since early July due to an equity transfer, is expected to restart production in September.

PTA Producers Turnarounds – August & September
(1,000 Metric Tons)

Company                                   Location                                Capacity           Turnaround

Sinopec Shanghai                    Shanghai (Shanghai)           400                      Mid-Aug to mid-Sep

Sinopec Tianjin                        Tianjin (Tianjin)                    330                     Early Aug to late Sep

Oriental Petrochemical          Shanghai (Shanghai)           740                      Late Aug to early Sep

Jiaxing Petrochemical            Jiaxing (Zhejiang)               1700                     late Aug to early Sep

Honggang Petrochemical      Lianyungang (Jiangsu)     1500                      Early-late Sep

Ningbo Mitsubishi                    Ningbo (Zhejiang)               600                    Early Jul to early Sep

Hengli Petrochemical              Dalian (Liaoning)              6600                     Each line around 5 days

                                                                                                                                from mid Sep to mid Oct

Total                                                                                          11,870

PET resin producers as well as beverage producers do not seem to be significantly affected by the measures of the local government in Zhejiang province.  Zhejiang Wankai is planning to extend production longer than originally planned until the end of August.  Far Eastern Industries in Shanghai will follow its original plan to shut its PET resin production at the end of August for 11 days.

However, the summit does appear to be impacting traditional polyester filament order patterns.  Although July demand is typically low for polyester filament, shipments this year were strong in July and early August due to uncertain supply.  According to industry sources polyester filament shipments, which have generally been below trend growth in the first half of the year (+1.4%), sharply increased by 11% in July.  Good demand has allowed producers to recover extrusion margins.

Impacts from the G20 summit have been much less in polyester staple markets than for filament as staple production in the Zhejiang region is relatively small.  There are only two major staple producers in the area and both continue to operate at a limited rate.

According to earlier reports, there will be approximately 5,850 ktpa of polyester polymerisation shut during the G20 summit.  However, recent news indicates as much as half that total may run, at least in part during the run up to the summit.  If all producers originally planning to idle production for 15 days shut, this will translate to approximately 250,000 tons of polymerisation out of the market.  China currently produces roughly 3 million tons per month of polyester (all forms).  In other words, an extreme case will take out 4% polyester polymerisation over the two months of August and September.  However, because outages are expected to be less than originally planned and there is spare capacity at other polyester producers outside the region, to cover potential shortages, the overall impact of the G20 summit on polyester production in China will be more limited than initial expectations.

Darrel Collier_web
Darrel Collier, Business Manager – Synthetic Fibres, Polyester & Intermediates

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