MOSCOW (MRC) -- China's polyester producers have been snapping up feedstocks purified terephthalic acid (PTA) and monoethylene glycol (MEG) amid a rise in operating rates ahead of peak demand season, according to producers and market sources TPS spoke to.
TPS reported in February that polyester demand was expected to strengthen in March after the Lunar New Year holidays, ahead of a seasonal rise in production before summer.
Loom operating rates among weavers in the key eastern China provinces of Jiangsu and Zhejiang have hiked to 84.25% March 14, compared to 49.39% reported on February 19.
Polyethylene terephthalate (PET) operating rates have risen to 77.59% for the same period after touching a 2016-low right after the holidays at 60.93% recorded on February 12.
A fiber intermediate broker estimates that polyester production rates were around 75% mid-March, which the broker described as "healthy".
"So far, PET is doing well, and operating rates are near capacity," according to a source from China's biggest PTA producer Yisheng Petrochemical.
However, the upside for PTA may not be so big, since supply is ample, the source said, referencing a recent startup of a 2.2 million mt/year PTA plant by China's Hanbang Petrochemical.
Nonetheless, PTA plants have responded favorably to the rise in PET and loom rates - PTA production buoyed higher to 66.66% March 14, after hitting a low at 54.39% reported on February 19. PTA operating rates lag behind those of the other two industries due a significant capacity overhang.
In the MEG market, most supply is imported as China lacks self-sufficiency, where transaction volume has spiked in March, according to MEG traders and brokers.
"I'm seeing an average of one hundred deals daily," one intermediates broker said.
Assuming parcels traded are in 500 mt or 1,000 mt lots, between 50,000 mt to 100,000 mt of MEG are transacted daily.
China's polyester industry typically enjoys peak seasonal demand ahead of summer.
We remind that, as MRC informed previously, in March 2016, Hanbang Petrochemical successfully started up its second purified terephthalic acid (PTA) unit and production operations are ongoing. However, the plant has yet to achieve on-spec production. According to the source, the plant is currently running one of its two production lines, each with an annual capacity of 1.1 million mt/year. A market source says the company has intentions to run the plant at full tilt once they are able to achieve on-spec production.
MRC