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China Focus: PTA sector may see better profitability on blasts of major PX plant

2015-04-10 GMT+8:00

BEIJING, Apr. 8 (Xinhua) - Chinese PTA industry may see price increases, better profitability and possible de-stocks due to a major blast at Fujian's Dragon Aromatics (Zhangzhou) Co., Ltd., one of China's largest paraexylene (PX) producers.

PX prices went up by around 50 US dollars per tonne in Asia market on Tuesday, which pushed up production costs of PTA to 5,100 yuan/tonne, said Cheng Lin, an analyst with Huatai Securities.

The price of PTA futures for May delivery at Zhengzhou Commodity Exchange has went up by over 12 percent since Tuesday, once touching high of over 4,800 yuan/tonne.

The product prices of rivaling Tongkun Group and Hengyi Petrochemicals also witnessed significant growth on Tuesday.

Tight PX supply may last until the operation of a 900,000 tonne/year PX project by Ningbo Zhongjin Petrochemical Co., Ltd. in mid-2015, according to Cheng.

Xianglu Petrochemicals, a sister company of Dragon Aromatics, has a PTA project in Zhangzhou with an annual capacity of 4.5 million tonnes. If production of Xianglu Petrochemicals is suspended due to blasts at Dragon Aromatics, PTA markets would see greater impacts, said Cai Yali, an analyst with Central China Futures.

China's PTA industry has experienced downturn since 2011, due to tighter policies and fast capacity expansions. The accident in Fujian could become a turning point for the past one-way decreases of PTA prices, said Cai.

The expected stabilization of crude oil prices in the second half, improving profitability of polyester sector and integration of PTA producers would support PTA prices, according to Cai.

Polyester producers would enter the cycle of restocking and PTA industry has come into a period of trimming capacity.

With 3.3 million tonnes of PTA production capacity, Shaoxing Fareast Petrochemical Co., Ltd. already shut production facilities and may go bankruptcy, according to recent media reports. 

Operating PTA plants have high operation rates and PTA stocks would see a turning point if the production of Xianglu Petrochemicals is suspended for long time, said Cheng. 

Time for fast increase in PTA production capacity has concluded and the sector would enter a period of better profitability, Cheng said.

In 2015, China would have limited new PTA production capacity coming into operation 

Now, PTA industry has entered a period of merger and restructuring and would have operation rates under control, said Chen Xiaoyan, an analyst with Galaxy Securities.

Low PTA prices have attracted buyers for restocking in the downstream like polyester producers, according to Chen.  

Dragon Aromatics suffered serious explosion and heavy fire with production facilities and tanks this late Monday.

China consumed 17.66 million tonnes of PX in 2014, including 9.08 million tonnes of imports. (Edited by Liu Yanan,