PX Is in Serious Short Supply
By John Zheng

PX (para-xylene) is an important organic raw material mainly
used to produce PTA (purified terephthalic acid) and in turn to
produce polyester (polyethylene glycol terephthalate). In
addition, it is also applied in the pharmaceutical sector.

Great deficit of the PX supply

China's production capacity for PX is more than 3.8 million t/a.
The output of PX was around 2.85 million tons in 2006, and the
average annual output growth of PX was around 14.5% from
2001-2006.
   In China, PX is mainly used to produce PTA and dimethyl
terephthalate. Around 85% of all PX consumption is in PTA
production. The rapid development of the polyester sector and
drastic expansion of PTA consumption have led to a rapid increase
of PX consumption.
    In 2006, the only newly added capacity of PX in China came
from expansion of the aromatic unit in Sinopec Yangzi
Petrochemical Co., Ltd. (PX capacity rose from 550 thousand t/a
to 800 thousand t/a) and the newly constructed aromatic project
in Qingdao Lidong Chemical Co., Ltd. (PX capacity was 630
thousand t/a). (CCR 2006 No.27) As the growth of PX capacity is
apparently lower than that of PTA capacity, the supply gap of
PX further increased in 2006. Since 2003, the supply gap of PX
has widened constantly. The import dependence of PX maintained
at around 40% during 2003-2005. Since 2006, the capacity of PTA
has increased rapidly. However, most of the newly constructed
PTA units don't have PX units to match. As most of the PX projects
being constructed or expanded are put into operation after 2008,
the supply deficit of PX will grow larger in 2007.

Japan and Korea were main import sources

The imported amount of PX was 1.608 million tons in 2005, an
increase of 41.4% over 2004. Major sources of PX imports to China
were Japan and Korea, and the quantities from the two countries
accounted for 87.4% of the total in 2005, 7.3 percentage points
lower than 2004. China's sources of PX diversified in 2005,
adding some countries such as Iran, Thailand, Malaysia and
Indonesia. The imported PX totaled 1.84 million tons in 2006,
and the imported goods mainly came from Asia.
   Six PTA producers (including Xiamen Xianglu Petrochemical
Co., Ltd., Zhuhai Biyang Chemical Co., Ltd., Zhejiang Hualian
Sunshine Petrochemical Co., Ltd. and Zhejiang Yisheng
Petrochemical Co., Ltd.) that had no PX units to match were major
importers of PX. These six PTA producers imported a total of
1.412 million tons in 2005, accounting for 87.8% of China's total.
Sinopec Yizheng Chemical Fiber Co., Ltd.  imported relatively
little PX, as its needs were met mainly by Sinopec.

Rapid capacity expansion will promote the development of
industrial chains

The rapid expansion of polyester capacity has promoted the rapid
development of the PTA sector. Especially when private companies
and foreign companies entered into PTA sector, the capacity of
PTA increased rapidly. Due to the difficulty in engineering
construction, a high threshold in production technologies,
large investment, a long period of capital recovery, and strict
control of naphtha, the growth of PTA capacity has lagged far
behind that of the PTA demand.
   As the PTA sector will be seriously restricted by the delay
of PX capacity expansion, PX is replacing PTA as the bottleneck
of polyester industrial chain development.
   The polyester industrial chain in China is seriously
restricted by PX, especially when polyester is apparently in
oversupply, the price rise of PX will narrow the margin of
polyester industry. Therefore, accelerating development of the
PX sector will promote the sound development of the polyester
industrial chain.

Table 1 Major PX Producers in China   (thousand t/a)
Producer                                                                     
Capacity
Sinopec Zhenhai Refinning and Chemical Co.    650
Sinopec Yangzi Petrochemical Co.        800
Sinopec Tianjin Petrochemical Co.        390
CNPC Liaoyang Petrochemical Co.         700
Sinopec Luoyang Petrochemical Co.       210
Sinopec Shanghai Petrochemical Co.      235
Sinopec Qilu Petrochemical Co.           65
CNPC Urumqi Petrochemical Co.           80
Qingdao Lidong Chemical Co.             630
Source: CNCIC

Table 2 Supply and Demand of PX in China
                    in Recent Years        (thousand tons)
Year    Output    Net import    Apparent consumption
2001    1 454    110     1 564
2002    1 484    240     1 724
2003    1 570    930     2 500
2004    1 870    1 104    2 974
2005    2 300    1 546    3 846
2006    2 850    1 742    4 592
Source: CNCIC