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Market Monitor | September 2015

Asia PTA facing pressure in 2016

Asia´s purified terephthalic acid (PTA) industry is expected to come under increasing pressure in 2016 as India adds 2.3 mt to its production capacity in the first half of 2016, industry sources said.

Reliance Industries is poised to start up its 1.1 mt/year No. 2 PTA in Dahej, while JBF Industries planning to kick off in first quarter 2016 its 1.25 mt/year PTA plant in the Mangalore Special Economic Zone. India is likely to have a PTA production capacity of 7.2 m tonnes/year by the first half of 2016. Its existing PTA capacity stands at 4.9 mt/year.

On the other hand demand in India is estimated to remain flat next year at 5 mt/year, which is expected to result in excess production capacity of about 2 mt if plants operate at full rates. This also means potential exports of 1-2 mt/year, depending on finalised supply contracts with both domestic and overseas buyers, and the final amounts allocated for captive usage as well as operating rates in the country.

Meanwhile, Indian Oil Company has also recently announced that it was keen on launching a 1-m tonne/year PTA unit at its Paradip refinery and expects to finish construction by 2020. This is on top of its existing 5,50,000 tonne/year PTA unit already operating in Panipat, Haryana.

Indian PTA producers face limited opportunities for exports, with massive surplus capacity in Asia locking out markets there. Indian producers are now targeting Middle East as a potential outlet for PTA cargoes, going neck to neck with other Asia Pacific producers in an attempt to offload cargoes. But the Middle East is considered fully saturated by PTA imports from South Korea, with South Korean producers already owning a large portion of the market share there.

Indian PTA market participants are now expecting a price correction in the latter part of this year, with the slow downstream demand from Indian polyester makers not helping sentiments much. Prices are likely to feel some downwards pressure in the face of such excess capacity, with any buying interest quickly smothered by the supplies offered by producers and traders. Premiums are out of the market and the high rates by producers in the past are likely to get diminished, or disappear completely.

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