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Asia Petrochemicals Outlook 2015

A News & Data Feature

Downstream run rates key to Asia's paraxylene demand

February 18, 2015-- By Gustav Holmvik in Singapore

Operating rates at existing and new downstream purified terephthalic acid plants sail up as one of key factors for paraxylene demand in Asia this year, given the addition of over 13 million mt/year of PTA capacity comes at a time of a slowdown in China's economic growth, market sources said last week.

Nearly 3.5 million mt/year of new PTA capacity will come onstream in China during the first half of 2015-- far outstripping the addition of 2.57 million mt/year PX capacity in China and India over the same period.

Another 9.75 million mt/year of new PTA capacity will start up in China, India and Taiwan during H2 2015, bringing to total about 13.25 million mt/year of additional capacity to Asia by the end of this year.

This compares to a total 4.37 million mt/year of new PX capacity this year, after 1.8 million mt/year comes onstream in India in H2 2015.

But the new PTA capacity may not necessarily equate to a sharp overall increase in PX demand across Asia, as outlook for global demand and operating rates at downstream polyester and PET remains uncertain amid a slowdown in China's economic growth, which would in turn, impact PTA run rates, several market sources said.

Chinese PTA producers could also potentially cut runs or even idle older plants in response to the onslaught of new capacity -- a move that could limit potential overall increase in China's PX demand, sources added.

PX CFR Taiwan China

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As of now, Asia's PX market is seen as being oversupplied, following the start-up of around 7 million mt/year PX capacity in Asia and the Middle East last year.

Reflecting this, Northeast Asia's paraxylene term contracts were concluded at discounts of $2-4/mt on a CFR Taiwan/China basis to their respective price formulas for term year starting January 2015, flipping from parity to a premium of $2/mt for 2014 term contracts.

New PX plants starting up ahead of turnaround season

In the short term, the PX market is expected to find support in the second quarter from heavy turnarounds and low PTA stocks in China, temporarily shrugging off the impact from additional capacity coming onstream.

"March spot PX prices may rise because some PX plants [will have] turnarounds in the second quarter," a Chinese PX producer said.

Several PX producers are planning to shut their plants in H1 2015 for scheduled maintenance.

South Korea's Hyundai Cosmo Petrochemical for one, will shut its No. 1 and No. 2 aromatics units at Daesan in May for a month.

The No. 1 and No. 2 units can produce 380,000 mt/year and 800,000 mt/year of PX, respectively.

Further out, Samsung Total will shut its 1 million mt/year No. 2 PX plant at Daesan for about 25 days in July.

"Supply seems to be more tight, but the main driver for [price] movement is the demand side. Inventory [of PTA] looks not too high [in China]... but in this high volatile crude [environment] it is not easy to predict anything," a trader said.

Meanwhile, China's Ningbo Zhongjin Petrochemical aims to start commercial operations at its new 1.6 million mt/year PX plant in Ningbo by late March, market sources said previously.

In India, Reliance Industries Ltd. expects to start production at its new 1.8 million mt/year PX plant in Jamnagar in H2 2015.

Meanwhile, Indian Oil Corp. has delayed the startup of a new 400,000 mt/year paraxylene plant at Vadodara in Gujarat state, from 2015 to 2017-2018.

China's downstream expansions

Two new PTA plants, with a combined capacity of 3.45 million mt/year, are scheduled to come onstream in China during H1 2015, potentially increasing demand for PX, although overall operating rates in the PTA sector remain uncertain, market sources said.

Hengli Petrochemical's new 2.2 million mt/year plant in Dalian is expected to begin commercial operations by the end of February, while BP Zhuhai Chemical Co. Ltd. expects to start commercial production of PTA at its new 1.25 million mt/year plant in Zhuhai, southern China's Guangdong province, over March to June.

Further out in H2 2015, China's Yisheng Petrochemical will start up a new 2.2 million mt/year PTA plant at Hainan, China Prosperity will bring onstream a new 2.2 million mt/year at Jiangyin, and Jiaxing Petrochemical a new 1.5 million mt/year plant at Jiaxing.

Elsewhere, Taiwan's OPTC will also start operations at its 1.5 million mt/year No. 3 plant at Taoyuan.

Next article: Asia purified terephthalic acid price stability pivots on tight supply balance

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