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China struggling for greater self-reliance in paraxlyene production

China struggling for greater self-reliance in paraxlyene production Source:
Date: 22-06-2013
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Despite being the largest polyester producer in the world, China is still struggling to exert its influence over paraxylene (PX) prices, the most important raw material used in the production of purified terephthalic acid (PTA). During the past three years, China’s imports of PX have represented 36%, 42% and 45%, respectively, of total domestic consumption.
Expansion in China’s polyester production has lead to increased competition to secure raw materials, from which PX producers in Japan and South Korea have been the main beneficiaries. Chinese firms have attempted to increase output, but demonstrations over the environmental impact of new factories in Dalian, Xiamen, Ningbo and Kunming, despite government assurances over potential pollution, have hindered planned expansions.
Since January 2013, the main PX producers in Japan and South Korea have expanded their manufacturing capacity, a trend that is expected to accelerate during the next five years. Six South Korean companies, including SK and Hyundai, have plans to increase their annual output from 6.49 million tonnes to 10.51 million tonnes during this timeframe.
Japanese firms are also expected to expand their capacity to around 4 million tonnes per year. At present, they can supply 2.5 million tonnes PX every year, with 80% of that production sold to China.
Despite output of PX inching higher during the past couple of months, quotations have not declined. Data from 16tex indicate that this month PX import prices are US$180 higher than the same month of last year. Domestic PTA spot rates rose by only 500 yuan (around US$80) per tonne during the same period.
Every month, PX producers in Japan and South Korea send their price lists directly to Chinese customers, not through traders. Local consumers claim that supplier work in syndicate to raise quotations, leaving limited scope for price negotiations.
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