China’s Dilemma – Paraxylene Shortfall vs. PTA Export Potential

Tecnon OrbiChem’s latest Analysis of World Paraxylene • DMT/PTA Markets puts into a global perspective the dilemma faced by Chinese PTA producers

The rapid global expansion in paraxylene capacity which started in 2009 has slowed in recent years. As a result, the world average capacity utilisation rate has been stable at around 75% from 2014 to 2016. However, the recent improved profitability of paraxylene production has revived interest in new paraxylene projects.

With limited new capacity coming on-stream in recent years, China still requires large volumes of imported paraxylene. China imported around 10.1 million tons in the first ten months of 2016, a small increase of about 4% over the same period in 2015. South Korea continues to export over 3 million tons per year and has become the largest paraxylene producing country in Asia. China is by far the largest importing country.

There is increasing pressure within China to reduce the paraxylene import dependence. But, with strong anti-paraxylene sentiment, on health and environmental grounds, amongst the Chinese public, paraxylene projects have become a sensitive topic in many cities. As a result, several refinery projects have been amended and will only produce mixed-xylenes, rather than paraxylene.

China currently accounts for over 50% of worldwide PTA capacity. Especially in the past several years, PTA capacity has expanded faster than demand and margins have been eroded. A continuing weakness in downstream polyester markets has led to delays and cancellations of new PTA projects and encouraged the rationalisation of older Asian capacity. It has also caused bankruptcy and integration amongst some Chinese and other Asian PTA producers.

Although Chinese PTA producers suffered losses for most of 2016, there have been no further PTA plant shutdowns since mid 2015. PTA supply and demand are balanced in the short term. Moreover, some previous idled PTA plants such as the former Zhejiang Yuandong and Chongqing Pengwei plans to restart in early 2017. The current balance may come under renewed pressure after these ‘new’ capacities start up.

PTA Producers Not Operating in Late 2016 

Company

Capacity (ktpa)

China

PetroChina Liaoyang

870

Yangzi Petrochemical

730

Zhejiang Yisheng

650

Chongqing Pengwei

900

BP Zhuhai

600

Xianglu Petrochemical

1,650

4,500

Zhejiang Yuandong

3,300

Hanbang Petrochemical

600

Total

13,800

Northeast Asia

SK Petrochemical, South Korea

520

Lotte Chemical, South Korea

400

CAPCO, Taiwan

1,320

Tuntex, Taiwan

440

FCFC, Taiwan

550

Mizushima Aroma, Japan

250

Hanwha, South Korea

450

Sam Nam Petrochemical

700

Total

4,630

Trade data shows that countries such as Korea, Taiwan and Thailand, which were previously significant net exporters, now struggle to sell PTA to China and must focus instead on alternative markets. On the contrary, they might soon face competition from Chinese PTA producers in the coming years – if they can secure paraxylene feedstock.

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roger_v2
Roger Lee
Managing Director
Phone: +44 207 924 3955
roger.lee@orbichem.com

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