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Future of chemical fibre markets looks bleak

13
Oct '08
Chemical fibre manufacturing companies are implementing a new wave of production cuts in their operations. This is mainly due to a rising inventory level of stocks.

China's largest manufacturer of purified terephthalic acid plant (PTA) Zhejiang Hualian Sunshine Petro-Chemical Ltd. has been forced to stop production recently, due to huge losses and failures of its operation in futures market, highlighting a domino effect of collapse in international crude oil prices and as downstream enterprises have frozen buying and are adopting a wait & watch attitude.

Zhejiang Hualian Sunshine Petro-Chemical Co., Ltd. has been set up only five years ago, with an annual PTA output of 2.0 million tons and is China's largest PTA plant. Xianglu Petrochemical follows in second place.

According to analysts from the industry, due to the looming shadow of global economic recession, currently the overall rate of polymerization operation rate in the mainland is only 50-60 percent.

It has been reported that Zhejiang Hualian lost nearly Yuan 1 billion last year due to poor profits from its PTA operations while its total liabilities soared to Yuan 9.5 billion.

But alongside Zhejiang Hualian also operated in the futures market and a failure in the same led to liquidity problems in September as a result of which it was forced to shut down three of its PTA plants leading to an uproar in the chemical fibres market.

Market analyst's say that the drop in demand of PTA will not see improvement in the short-term so a major re-shuffle in the petrochemical fibre market in China can be expected in next two years.

Fibre2fashion News Desk - China


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