Since the beginning of this year, the market for PTA has been in depression due to surplus capacity. Industry insiders think such situation will hardly change within short term, the PTA industry is subject to restructuring and the chance for recovery lies only in reshuffling and eliminating surplus capacity, but this will be a long and painful procedure.

In July, Far East Petrochemical, the fourth largest PTA producer in China filed for bankruptcy, but this is just the beginning.

Over the past five years, China's PTA industry realized explosive growth, with its capacity rising over 200% to 50 million tons from the 15 million tons in 2010. Currently, there is a surplus capacity of about 20 million tons, accounting for 40% of the total capacity.

The explosive growth of production capacity has intensified the competition and brought great negative impact on global PTA industry.

Since 2012, China's PTA industry has been operating in red and it is hardly profitable with the fast expansion of production capacity. It is worldwide accepted that it means serious surplus when capacity utilization rate is at 70%. By early November, the capacity utilization rate in China had stayed at about 60%, which means surplus capacity is more than "serious".

Excessive surplus capacity and intense competition had put the PTA market on a downward trend and this situation is expected to continue for a long time.

Industry insiders point out that it is very hard for the market to recover within short term, because the time when PTA was in shortage has gone forever. Only after the surplus capacity is abandoned can the market pick up, but within short term, the market will maintain the current situation.

Entering into November, with the traditional peak season drawing to the end, end-market consumption will continue to shrink. Therefore, the demand for PTA will continue the weak trend as downstream polyester producers operate at seasonally low rate and PTA price will remain at a low level in the fourth quarter. Under weak demand on both domestic and overseas markets, such situation will not change evidently.

Source: China Textile Leader Express