The prosperity of PTA industry is gradually declining
Click:10    DateTime:Apr.11,2023

By Qiu Qianqian, JLC Chemical

China’s pure terephthalic acid (PTA) industry has been expanding towards integration in recent years. With PTA rapid growth, both surging energy prices and worldwide economy recession have reduced upstream and downstream earnings and aggravated industry competitiveness, making the prosperity of PTA industry decline gradually. The operation rate remained low in 2022 due to periodical working load reduction and maintenance at PTA plants, making future-spot basis differential surge based on the under-supply of spot goods. Sluggish economic consumption is a drag on the terminal demand, and the market had a strong wait-and-see sentiment.

China becomes the major producer of PTA globally

Domestic polyester projects have been launched gradually during the last 20 years while PTA apparent demand has grown. And PTA capacity grew faster than downstream polyester, causing PTA imports to slump and exports to surge as a result of oversupply. Figure 1 shows the supply and demand balance of China’s PTA.

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Figure 1 China's PTA supply and demand balance from 2013 to 2022

The distribution of production capacity has not changed much in recent years

China’s PTA capacity is abundant in East, Northeast and South of China with a minor change in regional distribution between 2018 and 2022 (See Figure 2). East China was responsible for 52.49% of overall capacity, Northeast China 25.03%, and South China 17.00%, other regions about 5.48%.

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Figure 2 China’s PTA capacity distribution

By the end of 2022, China’s PTA enterprises with capacity of more than 1 million t/a include Yisheng Group, Hengli Petrochemical, Fujian Fuhaichuang Petrochemical, Zhejiang Dushan Energy, Tongkun Group, Sanfangxiang Group, Shenghong Group, Sinopec Yangzi Petrochemical, Sinopec Yizheng Chemical Fibre, Formosa Chemicals Industries (Ningbo), Huabin Chemical, Sichuan Energy Investment, Zhongtai Chemical, Fujian Billion Polymerization Technology Industrial, and Weilian Chemical.

As of the end of 2022, China’s total PTA capacity was 70 305 000 t/a, with a capacity of 3 300 000 t/a in Yisheng Petrochemical launched in February, and a capacity of 2 500 000 t/a from Weilian Chemical to launch in November (See Table 1). Meanwhile, due to a long time shutdown of units from Liaoyang Petrochemical, INEOS Zhuhai Chemical, and Xianglu Petrochemical, their capacity was erased. Though many new polyester plants were built in 2022 and demand saw an increase, current PTA capacity grew much faster than polyester, leading to the oversupply in domestic PTA market.

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The average operation rate of domestic PTA industry in 2018 was around 77%, with the minimum and maximum of 74% and 82% respectively (See Figure 3). Due to the good profitability of PTA production enterprises, the operating rate for the entire year of 2019 remained at 83%, the highest  in recent years. In 2020, under the sudden attack of the COVID-19, the operating rate of enterprises dropped to 73%, followed by 82% based on effective control on COVID-19. In 2021, under the influence of the “dual control” policy, the supply and demand of the PTA industry decreased, with an average operating rate of 76%, a minimum operating rate of 69%, and a maximum operating rate of 82%. In 2022, surging energy prices and global economy recession influenced by geographical conflicts reduced the earnings in upstream and downstream and aggravated industry competitiveness, leading to PTA prosperity fall after a rise. In 2022, domestic PTA average operation rate fell to the lowest level of the years of 75%, with the lowest and highest level around 64% and 86% respectively.

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Figure 3 Comparison of Changes in China’s PTA operating rate from 2018 to 2022

From 2018 to 2022, China's PTA production showed a gradual increase trend, but the growth rate slowed down and gradually declined (See Figure 4). After multiple new PTA units were put into operation, the situation of oversupply in China has intensified. Although downstream polyester production capacity has been added and demand has steadily increased, driving PTA production growth, the overall growth rate has slowed down. In 2022, PTA output increased by 4.30% to 55 470 000 tons from the previous year.

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Figure 4 Output and growth comparison of China’s PTA from 2018 to 2022

China’s PTA imports rose between 2018 and 2019, but reduced from 2020 to 2022, with a more dramatic reduction in 2021 (See Figure 5). The reasons for the above, on one hand, surging PTA capacity is responsible for PTA oversupply and some downstream polyester plants purchasing material nearby. On the other hand, surging sea freight caused a shortage of containers, and many buyers chose domestic products in preference to foreign ones due to high cost. The imports in 2022 dropped to a record low of 37 300 tons, decreasing 39 100 tons from one year ago with a drop of 51%.

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Figure 5 China’s PTA imports comparison from 2018 to 2022


Oversupply might be severe

Comprehensively, China’s PTA capacity has surged in recent years, with output increasing and imports reducing. With that, PTA supply is still in a rise in 2023. The capacity for PTA industries will exhibit a slow growth, with original PTA enterprises increasing production distinctly and some downstream enterprises building new raw material plants, making industrial chain develop towards upstream. What will come true is the full industrial chain of “Crude oil-PX-PTA-polyester”, and advances in integration project by leaps and bounds. While oversupply still lingers in PTA market, some new features have emerged from PTA industry during the development. 

Within 2022, a new PTA plant will carry out launch with a capacity of 5 800 000 t/a, and the old plant with a capacity of 3 050 000 t/a was phased out. Going through overcapacity and shuffling, domestic PTA supply variations have made a bigger difference on the market in recent years. In 2023, a new plant with a capacity of 18 700 000 t/a will start operation, and if launched as schedule, domestic PTA overall capacity will exceed 8 900 000 t/a, with a growth of 26.59% in 2023, 15.061% in 2024, and 5.86% in 2025. In a word, supply overcapacity of domestic PTA might be severe (See Figure 6). 

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Figure 6 China’s PTA capacity forecast between 2023 and 2025