Relocation of PX Business in Dalian May Lead to PTA Price Increase 15%

    On August, 14th, Dalian government decided to move PX producer Fujia Company. Now, the quotation of PTA which uses PX for raw materials increased to 10,000 Yuan/Ton. The industry insiders expected the PX price may increase from 1,500 USD/Ton to 2,000 USD/Ton. If this expectation comes true, the PTA price will increase to 11,500 Yuan/Ton, and the growth rate is 15%.  

    According to the analysts, the PX device capacity of Dalian Fujia Company is 700,000 tons per year, accounting for about 8% of domestic PX capacity, and its shut down will lead to a PX supply gap for more than 4,000,000 Ton/Year. The moved device will recover supply after one year and the PX price will change apparently soon. 

    According to China Securities Journal Research Center, by the end of 2010 the PX capacity in China was 9,060,000 Ton/Year; the import dependency rate was more than 30%, and the downstream PTA capacity was about 19,960,000 Ton/Year. In term of the 80% operating rate consuming 0.665 tons, the domestic PX gap is about 3,400,000 tons per year, and the shut down of Dalian Fujia will aggravate this situation.

    When the supply of raw materials reduced, the PTA capacity is expanding. In 2010, there is only 1,200,000 tons PTA going to operation, though from July, there is 3,700,000 tons PTA going to operation. In the next half year, the PTA self-sufficiency rate will be 70%-80%, considering the import from Korea and Taiwan, the supply and demand of PTA is still in balance in fact.

    The change of supply and demand made the industry insiders expected the PX price will increase, and lead to the rise of PTA cost pressure. Mr. Jianhua An from Yuyuan Chemical fiber futures department said if outside environment will not deteriorate, the PX price is expected to increase from 1,500 USD/Ton to 2,000 USD/Ton, the main PTA quotation may increase from 10,000 Yuan/Ton to 11,500 Yuan/Ton.

    The analyst from China Securities Journal Research Center, according to the PX price of Sinopec, said the cost of PTA is about 9,100-9,300 Yuan, the benchmark price will more than 11,000 Yuan/Ton.

    Though the rise of raw materials price means the profit of PTA producing enterprises will be restricted, but analyst says we should not bearish PTA excessively. Because PTA downstream businesses are expanding capacity, and the supply and demand is generally in balance. Relatively speaking, the enterprises producing raw materials PX and integration businesses are well regarded.

    The analyst thought the established PX projects, PX projects in construction, PX projects has examined and approved will be benefited in a long term. On one hand, the PX project will be difficult to be approved; on the other hand, the high capital, high-tech barrier make it difficult to invest PX project. It will make PX capacity expansion be seriously influenced in china, or lower than the growth speed of PTA.