China’s PTA Maintenance Nears End as Polyester Textile Sector Gears Up for Winter Demand
China’s PTA plants are coming back online after an extended period of maintenance, following geopolitical tensions that have fueled volatility in upstream energy costs and persistently high feedstock prices.
The curtailed production of aromatics – benzene, toluene and mixed xylenes – which resulted has had a knock-on effect on Asia’s PTA industry. PTA, which stands for purified terephthalic acid, is a chemical used mainly to make polyester fibers and plastic bottles. Manufacturing PTA relies on paraxylene or PX as a feedstock, which in turn relies on mixed xylenes for production.
Impact of High Feedstock Prices on Restarts
Continued geopolitical instability, volatility in upstream energy costs and persistently high PX prices prompted Chinese PTA producers to extend plant maintenance, which typically starts in April, during this period. The monthly average PX price rose from $910.78 per metric ton CFR China in February to $1,210.04/mt CFR China in March before peaking at $1,237.13/mt CFR China in April, according to OPIS data.
Chinese PX imports plummeted 33.3% month on month from a peak of 1.04 million mt in March to 694,250 mt in April, according to customs data. In response to soaring PX costs and scarce supply, downstream Chinese PTA producers accelerated planned annual maintenance in April to manage operational margins in a challenging business environment.
Production Coming Back Online
Now, however, producers are ramping up operations ahead of an expected demand surge, with the approach of the annual peak downstream polyester textile season in September. The average Chinese PTA plant operating rate rose 3.2 percentage points week on week to reach 72.2% by Sept. 17, according to an industry source.
Roughly eight Chinese PTA plants resumed operations in August after completing routine maintenance. Key facilities returning online during the month included Jiaxing Petrochemical’s 1.5 million mt/year plant and Zhejiang Dushan Energy’s 2.5 million mt/year No. 2 plant, both in Jiaxing, Zhejiang, following July shutdowns. Additionally, Jiangsu Honggang Petrochemical restarted its 5 million mt/year capacity in Lianyungang, Jiangsu, after taking these units offline in early July.
More recently, Yisheng Dahua Petrochemical Co’s 2.25 million mt/year PTA plant in Dalian, Liaoning was taken back online on Sept. 12 after a late August shutdown.
A Mixed Outlook
The September month-to-date PX-Naphtha spread, which measures the profitability of converting naphtha into PX reached $325.89/mt on Sept. 17, up 5% from the August monthly average, above the psychological $300/mt breakeven mark, OPIS data shows. PX production in the Asian market is viable at this level.
On the other hand, the September month-to-date PTA cash conversion costs, which measure the profitability of converting PX to PTA, is estimated at an average of 486.36 yuan ($72.51)/mt as of the same date, down 5.6% from August, according to an industry source. Further erosion of PTA cash conversion margins could force producers to cut output as profitability turns negative.
In addition, despite September being a peak season for the downstream polyester textile sector, a recovery in the overall Chinese polyester industry could be tempered by weak demand and increased maintenance in the PET chips segment, which is nearing its seasonal lull in demand. This may weaken overall demand for PTA, an industry source added.
—Reporting by Serena Seng, serena.seng@dowjones.com; Editing by Mei-Hwen Wong, mei-hwen.wong@dowjones.com