PTA (UPSTREAM) APRIL & MAY 2011

Paraxylene settled at a rollover at 85.5 cents/lb in the NA market, however, PTA settled a little higher at 71.50 cents/lb against March’s 70.97 cents/lb. New factors in the formula price had started factoring in light of rising crude oil prices; finally a cost push from MX was being felt.  However, downstream demand is moderate compared to March.  Many PTA producers were wary of the fact that PX settlement was high during April, which now could pose a threat of imports into the North American market, given the rapid decline of this feedstock in the Asian market.  In Europe, Lotte UK another force majeure due to catalyst change is putting strain on supply of PTA.  Further it was expected that 600 ktpa startup of PKN Orlen would suddenly ease the market, given that Cespa in Spain’s has diverted all production to San Roque PET facility and is out of the market for PTA supply.  However, repetitive outages of Lotte has ensured a tight PTA supply position as PKN Orlen is expected to commence commercial output by May.

The general notion in the Northeast Asian market has been that once textile inventories reach a low threshold, a demand pull would emerge for polyester.  This remains to be seen.  Some source suggested that the inventories of PTA had fallen to a low level, and that resumption of demand should be imminent.  However, other sources contended that price needed to fall significantly, before polyester operating rates could be increased.  Further Chinese interest rates were finally having a dampening impact on polyester demand.  Further Yizheng Ningbo plans to start up its 2000 ktpa PTA plant by mid 2011; this additional supply will result in a downward pressure on PTA prices.  Operating rates in China remained in the 70-80% in April, where as Korean operating rates remained in the region of 90%.  Similarly Taiwanese facilities maintained a high operating rate.  Also the intermittent shutdown of Capco and FCFC has allowed the supply to remain tight.  PTA inventories in Chinese market remains within in a normal range.  Some new huge expansions in the filament sector should allow for increase in demand in the medium term.  However, the economic climate brought about by governmental measures of repeatedly increase interest rates, has now surely affected downstream demand and subsequently plant productivities.  Further there have been electrical power limitations in Jiangsu and Zhejiang provinces which have negatively impacted the plant productivities.