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Downstream demand for "0"? PTA doesn't smell good anymore?

Sudden! Ineos, Lotte, and Mitsubishi withdraw from PTA business!

Mitsubishi Chemical: On December 22nd, Mitsubishi Chemical announced multiple announcements, including plans to transfer 80% of its shares in an Indonesian subsidiary and the appointment of a new CEO and other senior personnel.

Mitsubishi Chemical Group Co., Ltd. decided at an executive meeting held on the 22nd to transfer 80% of the shares of PT Mitsubishi Chemical lndonesia (MCCI) in Indonesia to PT Lintas Citra Pratama, which operates pure terephthalic acid (PTA) business.

MCCI has been producing and selling PTA in Indonesia since its establishment in 1991. Although the PTA market and business in Indonesia are stable and strong, the group is still considering its business direction and promoting portfolio management with a focus on market growth, competitiveness, and sustainability in accordance with the business policy of "forging the future".

It is reported that a subsidiary of PT Lintas CitraPratama plans to commercialize para xylene (the main raw material of PTA) in Southeast Asia.

Previously, it was reported that international giants including Ineos and Lotte Chemical have successively closed/exited PTA projects in the field of chemical new materials.

Lotte Chemical Promotion: Completely Exiting PTA Business

Lotte Chemical announced plans to sell its 75.01% stake in Lotte Chemical Pakistan Limited (LCPL) and completely withdraw from its purified terephthalic acid (PTA) business. This business divestment is part of Lotte Chemical's mid-term strategy to strengthen its high value-added special materials business.

LCPL is located in Kasim Port, Karachi, producing 500000 tons of PTA annually. The company sold the business to Pakistani chemical company Lucky Core Industries (LCI) for KRW 192.4 billion (approximately RMB 1.06 billion) (Lotte Chemical acquired LCPL for KRW 14.7 billion in 2009). LCI mainly produces PTA derived products such as polyester, with an annual production of 122000 tons of polyester polymer and 135000 tons of polyester fiber in Lahore, and an annual production of 225000 tons of pure alkali in Heulah.

Lotte Chemical stated that the funds obtained from the sale of PTA business will be used to develop the existing high value-added product markets such as polyethylene, polypropylene, and polyethylene terephthalate, and expand its specialty chemical business and enter the environmental protection materials industry.

In July 2020, Lotte Chemical stopped producing PTA at its 600000 ton/year factory in Ulsan, South Korea and transformed it into a facility for producing purified isophthalic acid (PIA). The current PIA production capacity is 520000 tons/year.

Ineos: Announces closure of a PTA unit

On November 29th, Ineos announced plans to shut down one of the smaller and older PTA (purified terephthalic acid) units in its PX and PTA integrated production facilities located in Herr, Antwerp, Belgium.

It is reported that this device has been in a state of shutdown since 2022, and a review of its long-term prospects has also been conducted for some time.

In its publicly released news, Ineos mentioned that the main reason for the shutdown of the device is that the increase in energy, raw materials, and labor costs has made European production less competitive compared to the export of newly launched PTA and derivative production capacity in Asia; And the group hopes to focus more on high-end new materials in its business.

Crazy production of raw materials, zero downstream demand?

On the other hand, in the domestic PTA market, as of now, the annual average price of PTA has declined compared to 2022.

Although the recent Red Sea crisis, coupled with local air closures caused by cold wave weather in China, has caused PTA to fluctuate upwards; However, the terminal textile orders at the end of the year were poor, and downstream spinning and weaving enterprises lacked confidence in the future market. Against the backdrop of increased inventory and financial pressure, they had a strong resistance to high priced raw materials, which led to difficulties in raising the spot price of polyester varieties, resulting in a significant decline in the profitability of multiple polyester varieties.

In addition, with the rapid development of integrated projects, the future PTA production capacity is still showing an increasing trend. In 2024, it is expected that domestic PTA production will reach 12.2 million tons, and the growth rate of PTA production capacity may reach 15%. From the perspective of capacity deployment, PTA may face significant excess pressure.

In recent years, the domestic PTA industry has experienced a period of overcapacity and a period of reshuffling and capacity reduction. The changes in supply patterns have had a significant impact on the market. With the production of new devices, the situation of oversupply in the domestic PTA industry may become more severe in the future.

Elimination acceleration! Industry competition is becoming increasingly fierce

With a series of large PTA devices being put into operation, the overall production capacity of PTA has become very large, and industry competition has become increasingly fierce.

At present, PTA leading enterprises continue to lower processing fees, seize market share, eliminate outdated production capacity, and most high processing cost devices have been eliminated. In recent years, PTA's newly put into operation devices are all advanced devices with a capacity of over 2 million tons from large factories, and the average processing cost in the industry has significantly decreased. In the future, with the increase of advanced production capacity, the average processing cost of internal devices for PTA production in the industry will decrease with production, and processing fees may remain at a low level for a long time.
Therefore, in the context of oversupply, intensified industry competition, and decreasing profits, the survival of enterprises is undoubtedly difficult. Therefore, it seems that the choices of Ineos, Lotte, and Mitsubishi are also reasonable, whether it is to focus on divesting their main business, to survive, or to prepare for subsequent cross-border and other strategies.

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