PTA markets are currently experiencing irrationally strong price hikes. With predictions for global consumption to reach new heights, how long will this upward momentum continue? What will be the impact of PTA price increase in the polyester fibre market?

Purified Terephthalic Acid (PTA) is used in polyester production. Textile industry consumes huge quantities of global polyester fibres. Polyester constitutes the main end use segment of PTA, with 61% of the total global consumption. Increase in the price of PTA has resulted in an increase in the price of Polyester Staple Fibre (PSF). Polyester industry has seen good action during this year, and the trend is likely to continue in the coming two years as well.

In 2007, global consumption of PTA was 37 million tons. It is estimated to grow at 6% per annum and reach more than 50.5 million tons by the end of 2012. The industry is currently facing surplus capacity. Massive capacity expansion in China and capacity additions in the polyester industry fuels the growth of PTA industry.

Expansion of polyester capacity, more particularly in India, and China is likely to surpass the growth of PTA capacities. This will make sourcing PTA tough during 2011, and a similar trend is likely to continue in the coming 2-3 years as well. Another perspective reveals that PTA producers would get health margins out of the same. PTA market is experiencing good margins and is positively expecting the same trend to continue in the next year also.

Global PTA manufacturers would plan for a higher plant utilization capacity, with analysts predicting it to rise up to 90% during the current year. Asian PTA production is mainly from countries of India, China, Middle East, and Thailand. During 2010, Asian PTA production capacity was 40 million tons. Growth is positively expected, with the capacity speeding up from 5-6% during 2007-10 to go as high as 18% by 2012. In 2013, it is expected to decline by 8%.

The robust demand for PTA in China has set price bubbles in the market. Market demand for PTA is expected to grow by 2 million tons during the current year, and there would be a tight gap between the demand and supply. In 2012, production capacity is expected to increase 6 million tons to reach 21.74 million tons. China will comprise 50% of the Asian production capacity amounting to 80% of the global capacity. Key players are of the opinion that it is not possible to run plants with a maximum utilization capacity of 92%. Experts are of the opinion that China will have to import more than 5 million tons of PTA per year till 2013.

Buyers in the Indian market also face problems regarding the availability of PTA. Plants have a maximum utilization capacity of 75%, whereas to meet with the growing demand, they have to run with 95% capacity. Thus meeting the demand would be challenging. Good market potential for polyester industry will boost the demand for PTA.