Focus. Market Review and Forecast

Transcription

1 China PET Monthly February 1, 29 Issue No. M.P Analysis & Forecast CONTENTS Focus 1 Market Review and Forecast 1 Price Monitor 2 PTA 3 Feedstock Production Cost and Margin Analysis Imports & Import Price Price PTA Future MEG 6 Production Imports & Import Price Price PET 8 Market Review PET Production PET Fiber PET Bottle Grade Relevant Market 11 R-PET Industry News 12 Appendix 15 PTA Plants Maintenance List MEG Plants Maintenance List PET Plants Maintenance List Trade Data Official Statistics O/R, Sales Ratio and Inventory of PET Plants Read more aout these articles inside... CBI (Shanghai) Co., Ltd. FL5, NO.799 Tianshan (W) Rd Shanghai, China 2335 Contacts: Fiona Chen Tel: Fax: chemicalresearch@cbichina.com Focus ASEAN Import Tariff Adjustments Restricts Thai PTA Access to China According to the new 29 Tariff Regulations, negotiated tariff rates for the China- ASEAN Free Trade Zone will be cut from 6.5% to 5%. Among the six ASEAN countries, Thailand s PTA tariff is affected the most. PTA Market Review and Forecast In January, both domestic and import purified terephthalic acid (PTA) prices were up, affected by rising PX market. Supplies in spot market continued to be tight. Domestic PTA output was 6, tonnes in January, 4, tonnes lower than December. The average operating rate at domestic PTA plants was 58.7%. MEG...Read more in Industry News In January, both east China and import prices of monoethylene glycol (MEG) rose. CBI estimated domestic output PFY PSF PET Bottle Grade was 146,1 tonnes in January, 16,3 Demand tonnes more than December. The average operating rate at domestic MEG plants was 82.2%. PET Market Forecast Before the Chinese Lunar New Year holiday, sales of fiber polyester products were strong, with sales ratios reaching 9-1%. Operating rates remained stable during January, at 6-8%, but some factories halted production for the Chinese Lunar New Year holiday from mid-january, and would not resume production until mid-february. Inventories were still low, as were feedstock inventories. PTA MEG PET Supply Price Supply Price O/R Feb Price PET Fiber Chip Up(>+5%) Slightly Up(1%~5%) Stable(-1%~1%) Slightly Down(-5%~-1%) Down(<-5%) This report is for the exclusive use of the subscribers. Distribution outside of the client company is strictly prohibited without the prior written consent of CBI. The contents presented herein are strictly the opinion of CBI and are based on information collected within the public sector and on assessments by CBI staff. CBI MAKES NO GUARANTEE OR WARRANTY AND ASSUMES NO LIABILITY AS TO THEIR USE. Copyright 27 CBI (Shanghai) Co. Limited All rights reserved.

2 PRICE MONITOR 1 28 Name Item Unit Monthly Prices2 Feb-8 Mar-8 Apr-8 May-8 Jun-8 Jul-8 Aug-8 Sep-8 Oct-8 Nov-8 Dec-8 Jan-9 Monthly Change PX Import USD/tonne 1,123 1,256 1,291 1,374 1,593 1,592 1,385 1, AA Import USD/tonne Domestic 5,36 5,569 5,578 5,7 6,82 6,66 4,76 4,729 3,799 3,48 2,99 2,676 PTA Import USD/tonne ,21 1,153 1,16 1, Domestic 7,456 7,959 7,851 8,25 9,381 9,311 8,696 7,374 6,263 4,599 5,77 5,481 MEG Import USD/tonne 1,19 1,165 1,84 1,85 1,137 1, Domestic 9,684 9,732 9,1 8,82 9,293 8,445 7,317 6,77 5,77 3,693 4,175 4,244 Bottle Grade PET Export USD/tonne 1,316 1,379 1,415 1,421 1,485 1,519 1,443 1,279 1, Domestic 11,6 11,682 11,723 11,72 12,182 12,431 11,594 1,727 9,477 7,18 7,56 7,16 Semi-dull PET Domestic 1,437 1,83 1,77 1,453 11,26 11,144 1,376 9,77 8,275 5,912 6,73 6,271 PSF Domestic 11,329 11,554 11,448 1,969 11,67 11,896 11,388 1,872 9,431 7,146 7,44 7,231 PFY Domestic 11,565 11,847 11,794 11,564 12,23 12,12 11,698 11,84 9,513 7,24 6,951 7,3 Last updated on Feb. 1st. 1. In this PRICE MONITOR, monthly prices is the monthly average price. 2. Unless specified, prices in this report are taken as follows: PX: The FOB Korea price, L/C at sight is taken as reference for the import price. AA: The East China ex-tank price, cash is taken as reference for the domestic market price. PTA: The East China ex-tank price, cash is taken as reference for the domestic market price; The CFR China main port price, L/C 9 days is taken as reference for the import price. MEG:The East China ex-tank price (more than 5 tonnes), cash is taken as reference for the domestic market price; The CFR China main port price, L/C 9 days is taken as reference for the import price. Fiber Chip PET: The East China ex-tank price, cash is taken as reference for the domestic market price. Bottle Grade PET: The East China delivery price, cash is taken as reference for the domestic market price; The FOB China main port price, L/C at sight is taken as reference for the export price. PSF: The East China delivery price(1.4d*38mm), cash is taken as reference for domestic market price. PFY: The East China ex-work price (POY,15D/48F), cash is taken as reference for domestic market price. 2

3 1. PTA 1.1 Feedstock PX During January, PX prices in Asian spot market soared due to snug supply, stable demand and traders play combined to list prices firmly. Improved conditions in the downstream PTA sector also helped boost sentiment By the end of January, PX spot prices closed at 88-89/tonne FOB Korea, a sharp increase of $18-19/tonne from last month. With regard to contract prices, the Asian contract price for January and February paraxylene was settled at $63/tonne and $72/ tonne CFR Asia. PX Price VS. PTA Price 1,5 1,3 1,1 9 ` 7 5 Aug-8 Sep-8 Oct-8 Oct-8 Nov-8 Dec-8 Jan-9 1, 9, 8, 7, 6, 5, 4, PX (CFR CMP) PTA (E. China) AA Price: Acetic acid (AA) market in January was still soft amid contracting demand and prices in all regions dropped by yuan (CNY)2/tonne. By 23 January, prices in east China fell by CNY15-2/tonne to CNY2,5-2,75/tonne. In south China, prices declined by CNY15-2/tonne to CNY2,7-2,8/ tonne. Supply: Celanese Nanjing s 6, tonne/year acetic acid unit restarted in late December and operated steadily in 2, January, which was expected to contribute over 4, tonnes. Jiangsu Sopo reduced the capacity from 15 January and the daily output dropped to around 1,1 tonnes. Other units AA (E.China) PTA (E. China) remained stable production. Domestic acetic acid supply was expected to increase by 15, tonnes from December. 1, 8, 6, 4, AA Price VS. PTA Price Aug-8 Aug-8 Sep-8 Oct-8 Nov-8 Dec-8 Jan Production 3 As the Chinese Lunar New Year holiday approached, some domestic producers opted to conduct maintenance. According to CBI estimates, domestic purified terephthalic acid (PTA) output was 6, tonnes in January, 4, tonnes lower than December. The average operating rate at domestic PTA plants was 58.7% (based on a total capacity of12,26, tonnes/year). Some domestic PTA producers planned maintenance in February, and CBI estimates output in February will continue to be cut to approximately 567, tonnes. tonnes 1,2 1, PTA Production and O/R Estimate Forecast 1% 8% 6% 4% 2% % Sep-8 Oct-8 Nov-8Dec-8 Jan-9 Feb-9 Capacity/month Production/month O.R. (Note: Xiamen Xianglu expanded capacity from 1,5, to 1,65,tonnes/year in June 28, so CBI estimates total domestic capacity at 12,26, tonnes/year.) 3. In the Production graph, CBI estimated the output in the current month and forecasted the output of next month. 3

4 Plants: BP Zhuhai s 5,tonnes/year unit will be shut down in early February for maintenance. Its 9,tonnes/ year unit, which was shut down on 5 December, had been restarted at the end of January. Xiamen Xianglu s 1,65, tonnes/year unit was running at 5% at the beginning of January, but then shut down on 1 January. The unit was restarted on 18 January and was running at 6%. One 6,tonnes/year PTA unit of Hualian Sunshine has been offline since September 28, with the restart time unknown. The PTA units of Yishen Dalian PC and Ningbo FCFC were still in testing. Ningbo Mitsubishi plans maintenance on its 6,tonnes/year unit for one month beginning in early February. One line of Yangzi PC (capacity 35,tonnes/year) was still shut down. Tianjin PC s 34,tonnes/year PTA unit has been in maintenance since late September, with possible restart in early March. Liaoyang PC s No.1 PTA unit is also shutdown and any restart time was unclear. (See Appendix for details). 1.3 PTA Production Cost and Margin Analysis Spot PX prices surged in January, up from $71/tonne (CFR CMP, L/C 9 days) at the beginning of the month to $848/ tonne (CFR CMP, L/C 9 days) at the end of January. Contract prices of PX also rose to $63/tonne, $3/tonne higher than December levels. Average costs for PTA producers increased by nearly CNY 2/tonne from last month. Though PTA prices increased as well, the average margins were less than December levels, down by almost CNY 1/tonne. 1.4 PTA Imports 4 According to official statistics, China imported 473,38 tonnes PTA in December, down 117,53 tonnes from November, with an average imported price of $554.73/tonne. China imported 124,23 tonnes QTA in December, up 34,34 tonnes from November. The average imported price was $524.42/tonne. The total imported volume of PTA and QTA was 597,6 tonnes in December, up 34.1% month on month, and 13.7% year on year. Trades of contract cargoes were executed extremely well in January. Influenced by tight spot markets, some suppliers strictly controlled their supply, and were inactive in negotiating February contracts, but were expected to trade with downstream contract users when prices were higher. Mainstream traded prices for January contracts were at $62-65/tonne. Plants: CAPCO#1, CAPCO#2, CAPCO#3 and CAPCO#4, all located in Kaohsiung, Taiwan, with the total capacity of 1,,tonnes/year, remain shut. CAPCO#5, located in Kaohsiung, Taiwan, will be in maintenance for 1 days beginning in early February. CAPCO#6, located in Taichung, Taiwan, was shut on 2 January, with no restart time. 4. Custom statistics are released two month later than the real time, so import/export data of the nearest two months listed in this report are estimated by CBI analysts based on the collected information. It is the same with production data released by China Statistic Bureau. 4 Price&Cost 11,5 tonnes 1, 8,5 7, 5,5 4, China PTA Production Cost and Margin Aug-8 Aug-8 Sep-8 Oct-8 Nov-8 Dec-8 Jan-9 Profit 1,4 1, PTA Profit Production Cost PTA Price PTA&QTA Imports and Import Price Jan Feb Mar Apr May Jun Jul Aug Sep OctNov Dec 1, Imports 28 Imports 27 Import Price 28 Import Price Import PTA Price VS Domestic PTA Price 11, 1, 9, 8, 7, 6, 5, 4, 8-Aug 8-Sep 8-Oct 8-Oct 8-Nov 8-Dec Import PTA Price 9-Jan Domestic PTA Price

5 Taekwang s 1,,tonnes/year PTA unit in Ulsan, Korea has been in maintenance since 8 January. Samnam PC is planning a three-week maintenance cycle for its No.1, No.2, No.3, and No.4 PTA and QTA units (total capacity 1,75,tonnes/year). Mitsui Chemicals 19,tonnes/year No.1 PTA unit in Iwakuni, Japan was still in maintenance, and its 16,tonnes/year No.2 unit has been restarted since early February. Mitsubishi Gas 255,tonnes/year PTA unit will undergo maintenance from early February until late March. Mitsubishi Thailand has put its PTA units (total capacity 1,4,tonnes/year) into maintenance in phases, keeping average operating rates at 85%. Polyprima s 48,tonnes/year PTA unit has been offline since October 27. Mitsubishi Chemicals 32,tonnes/year PTA unit, located in Merak, Indonesia, was put into maintenance for one week at the end of January. (See Appendix for details). PTA Import Analysis by Region Region Volume Value Import Price Share tonnes USD USD/tonne % Korea ,137, % Taiwan ,293, % Thailand ,37, % Japan ,476, % Malaysia ,495, % others ,156, % Totals ,598, % PTA Import Analysis by Region (HS Code: ) 12.6% 4.% 3.6% 32.9% 41.5% 5.5% Korea Taiwan Thailand Japan Malaysia others 1.5 PTA Prices Review In January, both domestic and import PTA prices were up, affected by rising PX market prices. Supplies in spot market continued to be tight. In east China markets, PTA prices continued to rise as supplies were still limited. Offers were made at high prices, but few trades were confirmed. In early January, market activity was light after the New Year holiday, and mainstream prices were found in the CNY 5,1-5,2/tonne range. As the futures market prices rose sharply, downstream polyester factories began to actively seek cargoes, driving up mainstream prices to CNY 5,45-5,5/tonne. In mid-january, prices continued China PTA Prices rising to CNY 5,55-5,6/tonne as PX supplies became tighter, but no trades were made due to lack of cargoes. Most players were optimistic for the outlook after the Chinese Lunar New Year holiday. In import markets, prices also rose. In early January, suppliers indicated the lack of PX would affect production at PTA producers, resulting in a cut in PTA market supply. Buyers were cautious, and downstream polyester factories continued to look for cargoes while saying they would put units into turnaround. Mainstream prices increased to $635-64/tonne. In mid-january, prices surged to $65-66/tonne due to further tightening of supply, driving up the futures market. Rumors the Chinese government would start anti-dumping investigations for PTA imported from Korea spread in the market, pushing prices up and increasing trading activity. Discussion prices rose to $67/tonne before the Chinese Lunar New Year. 1,2 1,1 1, Aug8-Sep8-Oct8-Oct8-Nov8-Dec9-Jan PTA (CFR CMP) 12, 11, 1, 9, 8, 7, 6, 5, 4, PTA (E. China) 5

6 Forecast PTA supply will continue to shrink in February and high PX prices might give support to higher PTA prices. However, downstream demand will not likely recover in the short-term and downstream buyers might resist current high feedstock prices. CBI expects PTA prices to continue rising in February. 1.6 PTA Futures Contract prices of PTA opened at 5,358 points in early January, but then bottomed out at 5,7 points on 5 January. It then rose, but fell back to 5,3 points on 13 January, closing the month at 5,86 points. Open positions decreased by 63,48 lots, to 52,76 lots. 2. MEG 2.1 MEG Production According to CBI estimates, domestic monoethylene glycol (MEG) output was 146,1 tonnes in January, 16,3 tonnes more than December. The average operating rate at domestic MEG plants was 82.2% (based on total capacity of 2,132, tonnes/year). Some domestic MEG producers restarted units in January. MEG Production and O/R Estimat Forecast YPC-BASF shut down its 3, tonnes/year MEG unit on 8 January, restarting on 25 January. Shanghai PC s No.2 MEG 4 2% % unit (capacity 38,tonnes/year) shut down since October Sep-8 Oct-8 Nov-8 Dec-8 Jan-9 Feb-9 28, was restarted on 15 January. Maoming PC restarted its 15,tonnes/year MEG unit on 1 January and was now Capacity/month Production/month O.R. running at 9%. Beijing Eastern s 4,tonnes/year MEG unit was still running at a low operating rate. (See Appendix for details). ooo tonnes % 8% 6% 4% 2.2 MEG Imports According to official statistics, imported MEG volumes in December were 38,2 tonnes, a decrease of 8,6 tonnes from the previous month, but up 7.1% year on year. Approximately 33% of the total came from Saudi Arabia, 15.7% from Taiwan, 14.7% from Korea, 13% from Canada, and 8.4% from Iran. The average imported price of MEG was $462/tonne, down $118/tonne from November. 6

7 Plants: Taiwan Nan Ya Plastics No.1 MEG unit in Mailiao, Taiwan, with the capacity of 35,tonnes/year, resumed production in mid-december. Its 7,tonnes/year No.4 MEG unit was still operating normally. Its No.2 and No.3 MEG units, with total capacity of 6,tonnes/year, were still offline. (See Appendix for details). tonnes MEG Imports and Import Price Jan Feb Mar Apr May Jun Jul AugSep Oct Nov Dec 1,8 1,5 1, Imports 28 Imports 27 Import Price 28 Import Price 12, Import MEG Price VS Domestic MEG Price 1, 8, 6, 4, 2, Aug-8 Sep-8 Oct-8 Oct-8 Nov-8 Dec-8 Jan-9 Import MEG Price Domestic MEG Price MEG Import Analysis by Region Region Volume Value Import Price Share tonnes USD USD/tonne % Saudi Arabia ,475, % Taiwan ,911, % Korea ,669, % Canada ,239, % Iran ,986, % Others ,248, % Total ,53, % MEG Import Analysis by Region (HS Code: 29531) 8.4% 13.% 14.7% 15.7% 15.1% 33.% Saudi Arabia Taiwan Korea Canada Iran Others 2.3 MEG Prices Review East China MEG prices rose slightly in January. Domestic market prices plunged steeply before the New Year holiday, and imports were limited due to lack of trades.. Meanwhile, some domestic producers underwent maintenance, resulting in tight supply. Traded prices in east China market then began climbing gradually from CNY 4,8/tonne, to CNY 4,3/tonne. The increase was slow due to pessimistic outlook for demand. Most downstream polyester factories halted production as the Chinese Lunar New Year holiday neared. 7

8 Imported MEG prices fluctuated in January. After the New Year holiday, import market prices opened at $55-51/ tonne. Players took a wait-and-see attitude and were cautious in trading. Traded prices then slipped to $492-5/ tonne. As the Chinese Lunar New Year holiday neared, traders and downstream polyester factories began to replenish stocks, so sellers were unwilling to sell at lower prices. Market prices gradually rebounded to $55-51/ tonne at the end of January. 1,3 1, China MEG Prices Aug-8Sep-8 Oct-8 Oct-8 Nov-8Dec-8 Jan-9 11, 9, 7, 5, 3, 1, MEG (CFR CMP) MEG (E. China) Forecast More cargoes would enter the market in February, easing the tight supply situation. Downstream demand would not immediately recover from the long holiday, and CBI expects MEG prices may rise up briefly and then slip back during February. 3. PET Before the Chinese Lunar New Year holiday, sales of fiber polyester products were strong, with sales ratios reaching 9-1%. The average sales ratio of polyester filament yarn (PFY) was 13.3%, polyester staple fiber (PSF) 87.5%, and semi-dull chip (SD Chips) 95%. Operating rates remained stable during January, at 6-8%, but some factories halted production for the Chinese Lunar New Year holiday from mid- January, and would not resume production until mid-february. Inventories were still low, as were feedstock inventories. 3.1 PET Fiber Review % Jan-8 Feb-8 Operation Rate of PET 5 Mar-8 Apr-8 May-8 Jun-8 Jul-8 O/R of PET O/R of PET Fiber O/R of Bottle Grade PET Aug-8 Sep-8 Oct-8 Nov-8 Dec-8 Jan-9 In general, all polyester fiber products prices rose during January due to strong sales. 13, PET Fiber Prices After the New Year holiday, downstream textile factories continued to build stocks and the sales of fiber polyester products were strong, helping push up prices. In east China markets, the price of POY (15D/48F) rose from CNY 6,7-6,9/tonne, to CNY 6,9-7,4/tonne, prices of PSF (1.4D*38mm) rose from CNY 7,5-7,15/tonne, to CNY 7,2-7,5/tonne, and prices of SD Chips rose from 11, 9, 7, 5, Aug-8 Sep-8 Oct-8 Oct-8 Nov-8 Dec-8 Jan-9 PET Fiber Chip PSF PFY 5. The operation rate in this graph is the average level of PET Industry, including PET Fiber Chip, PSF, PFY and bottle grade PET. 8

9 CNY 5,9-6,1/tonne. to CNY 6,4-6,5/tonne. Considering PTA and MEG prices, most semi-dull PET chips producers were able to break even, PSF and POY producers were able to gain margins on average of CNY 24-4/tonne. Cost&Price 13, 11, SD Chip Production Cost and Margin In domestic textile markets, the average daily traded volume during January at Shaoxing Qingfangcheng (China s biggest textile market) was 3,38, meters, down 46.5% month on month. According to Chinese Customs, the value of exports in December was $16.7billion, $.65 billion less than 9, 7, 5, ,3-1,8 Aug-8 Sep-8 Oct-8 Oct-8 Nov-8Dec-8 Jan-9 November. The value of garments and yarn were $11.1 billion and $4.97 billion, respectively. Compared with the same period Profit Production Cost PET SD Chip Price of 27, the total value of garments increased 15.12% while value of yarn was basically flat at last year s level. Profit 7 2 Cost&Price 13, 12, 11, 1, 9, 8, 7, 6, PSF Production Cost and Margin Profit 1,8 1,5 1, Aug-8 Sep-8 Oct-8 Oct-8 Nov-8Dec-8 Jan-9 Profit Production Cost PSF Price PFY Production Cost and Margin Cost&Price Profit 13, 12, 11, 1, 9, 8, 7, 6, 5, Aug-8 Sep-8 Oct-8 Oct-8 Nov-8Dec-8 Jan-9 1,6 1, Profit Production Cost PFY Price Forecast Most polyester factories will not likely resume normal production levels until mid-february. However, feedstock inventories were at low levels, so producers may replenish feedstock after the Chinese Lunar New Year holiday. 9

10 3.2 Bottle Grade PET Domestic Market Operating rates for bottle grade PET maintained at 6% in January, a little down from December. Sales were good before the Chinese Lunar New Year holiday and the average sales ratio of bottle grade PET plants was 88.3%, a bit higher than that of December. The domestic prices of bottle grade PET chips maintained at CNY7,1-7,2/tonne after the New Year holiday. 1,6 1,5 1,4 1,3 1,2 1,1 1, 9 8 Bottle Grade PET Prices Aug-8 Sep-8 Oct-8 Oct-8 Nov-8Dec-8 Jan-9 13, 12, 11, 1, 9, 8, 7, 6, Export Price (FOB CMP) East China Price Bottle Grade PET Production Cost and Margin Cost&Price Profit 13, 2,2 12, 1,7 11, 1,2 1, 7 9, 8, 2 7, -3 6, -8 8-Aug 8-Sep 8-Oct 8-Oct 8-Nov 8-Dec 9-Jan Profit Production Cost PET Bottle Grade Price Export Market In January, the prices of bottle grade PET in the export market rose up from $86-89/tonne (FOB CMP) early this month to $89-9/tonne end of this month. In December, exports of Chinese bottle grade PET totaled 42, tonnes, down by 5.3% from November levels and 47.2% year on year. The average export price was $955/ tonne, a drop of $155/tonne from previous month levels and $375/tonne year on year. As demand in January didn t change from December, CBI expected the export in January would be 4, tonnes, basically at the same level of December. But as the feedstock prices up, the export prices of bottle grade PET would be slipped a little to $96/tonne. tonnes Bottle PET Exports and Export Price Jan Feb Mar Apr May Jun Jul AugSep OctNov Dec 27 Exports 28 Exports 27 Export Price 28 Export Price 6 2, 1,6 1, W statistic bottle grade PET export data in this graph, whose HS Code is But some exporters use in trades. As such, data showed in this graph may be smaller than real figure. 1

11 The total export volume of bottle grade PET chips and other PET chips was 64,7 tonnes in December, up by 8.2% month on month but down by 34.9% year on year. The average export price was $99/tonne in December, a drop of $14/tonne from November levels and $352/tonne from December 27. tonnes China PET Chip Exports and Export Price Jan Feb Mar Apr May Jun Jul AugSep OctNov Dec 7 1,8 1,5 1, Exports 28 Exports 27 Export Price 28 Export Price 4. Relevant Market R-PET China imported 72,1 tonnes of recycled PET (R-PET) in December, with the average price at $471/tonne. The import volumes decreased by 22.1% year on year and 1.1% month on month. The average import price decreased by $145/tonne from the same period last year and $186/tonne from last month. The export volume of uncard PSF (most PSF is based on R-PET) was 29,6 tonnes in December, down 26.9% from last year but up by.4% from last month. The average export price was $1,72/tonne, down $153/tonne year on year and $118/tonne month on month. tonnes China R-PET Imports and Import Price Jan Feb Mar AprMay Jun Jul AugSep OctNov Dec 27 Imports 28 Imports 27 Import Price 28 Import Price 2, 1,8 1,6 1,4 1,2 1, tonnes China Uncard PSF Exports and Export Price 1,5 Jan Feb Mar Apr May Jun Jul Aug Sep OctNov Dec 27 Exports 28 Exports 27 Export Price 28 Export Price 1,4 1,3 1,2 1,1 1, 7. In this graph, CBI totaled bottle grade PET (397611) and other PET chip (397619) export data together. 11

12 China PET Monthly CBI China 5. Industry News ASEAN Import Tariff Adjustments Restricts Thai PTA Access to China The State Customs Bureau released the #98 decree which had been approved by the State Council, regulating import tariffs of PTA ( ) and other terephthalic acid products ( ) listed below: 1. Tariffs for goods from Korea and India will remain at 6%; 2. Tariff for goods from Brunei, Malaysia, Burma, Philippines, Singapore, Thailand, and Vietnam will be cut to 5% According to the new 29 Tariff Regulations, negotiated tariff rates for the China-ASEAN Free Trade Zone will be cut from 6.5% to 5%. Among the six ASEAN countries, Thailand s PTA tariff is affected the most. On 15 December 28, the Ministry of Finance released the Notice of the Customs Tariff Commission of the State Council on Adjusting Tariff 29, but it did not announce specific tariff rates. However, there were rumors already spreading that tariffs for Thai PTA will be revised downward. At the beginning of 29, the government released 29 Tariff Regulations, giving support to the sluggish PTA spot market. According to Goods Trade Agreement signed by China-ASEAN Free Trade Zone in November 24, the tariff rates of China-ASEAN Free Trade Zone will be cut year on year. According to Goods Trade Agreement, all goods can be divided into normal or sensitive products. Normal products consist of first and second-tier products, and their tariff rates shall eventually be zero. The difference between the two kinds of products is that second-tier products are flexible in the time set to cancel the tariffs. Before 29, PTA and other terephthalic acid products were classified as normal second-tier products. Their tariff-cut steps are listed below: tariff rates of normal products in the China-ASEAN Free Trade Zone (old members of ASEAN: Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand) shall be cut from July 25 and shall reach % by 1 January 21. Tariff rates of products from new members of ASEAN (Cambodia, Laos, Burma and Vietnam) shall be cut from July 25 and shall be cut to % by 215. The tariff-cut steps of second-tier normal products are as the same as first-tier products, with some differences. Broadly speaking, tariff rates of second-tier normal products in China--ASEAN Free Trade Zone (old members of ASEAN: Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand) shall be cancelled by 1 January 212, and rates of products from new members of ASEAN shall be cancelled by 1 January 218. However, the numbers of second-tier products shall be restricted to 15 between China and the six old members of ASEAN, and will be restricted to 25 for total new and old members of ASEAN. Accordingly, classification of PTA and other terephthalic acid products was unclear as of December 28, and are still listed as second-tier normal products in the 29 Tariff Regulations. According to CBI statistics, the share of Thailand PTA imports to China are still ranked third, but imports from Thailand during January-November 28 totaled 528,6 tonnes, down 52.84% from the same period of 27. Thai goods have price advantages in China s PTA spot markets, and the cut of negotiated tariffs to 5% for other nations will decrease Thailand s market share in China. For Chinese buyers or producers, they can save on production costs by at least CNY 5 for each tonne of Thailand goods, so shares of Thailand goods will increase, but will invite competition from goods from Taiwan and Korea, even Chinese PTA products. Market players are not sure yet the impact of 29 Tariff Regulations on the Chinese PTA market Date: 6 January 12

13 MEG Market Early 29 Prospects: Weaker Demand and Stronger Supply Most players are still reeling from the sharp decline in MEG prices during 28, and are concerned about the direction of the MEG market in 29. Supply: It is reported that a 42, tonnes/year unit of Tianjin PC will be launched in Q2 29, and the original restart plan of Zhenhai Refinery s 6, tonnes/year unit will now likely be delayed to early 21. Apart from these two exceptions, there will be no significant changes in domestic MEG capacity in 29. Yangtze-BASF s 3, tonnes/year unit is expected to restart in the end of January and Shanghai PC s 1# 235, tonnes/year unit may be shut down based on market conditions. Taiwan Nanya s four production lines, including one 7, tonnes/year line and one 3, tonnes/year line, are now running, but the other two lines, each with capacity of 3, tonnes/year, remain offline. Formosa USA s 36, tonnes/year unit was shut down in September 28, with restart date unknown. Sumitomo has delayed the start-up of its new 6, tonnes/year unit in Saudi Arabia from the end of 28 to sometime in Q1 29. Operations at Sabic s two 7, tonnes/year units in Yanbu and AL-JUBAI will be also delayed to Q1 or Q2 29. Based on the conditions listed above, domestic MEG supply will likely increase significantly. Demand: There have been close to 3 million tonnes of downstream polyester capacity shutdown at of the end of 28, with other new capacity projects delayed or idled amid the financial crisis. Downstream polyester units are now resuming production after the holiday, but players are worried about total operating rates of polyester plants through 29 in view of sharply reduced export orders and the delayed return of migrant workers. Accordingly, players are cautious about Q1 MEG market prices while supply is increasing but demand has yet to recover. Date: 22 January PTA Market Prospects: Tightening Supply and Rising Prices The PTA market ended year 29 on a positive note. Contrary to traditional pre-festival sentiment, PTA prices rose in the last week before the Chinese Lunar New Year holiday. There were many enquiries even though some PTA plants had been shut down. PTA prices rose from CNY 6,9-6,95/tonne in early 28, to CNY 7,6/tonne in Q2 28. News of a trucker strike at Ulsan Port in June, plus rumors textile export rebates would likely be lifted caused prices to surge to CNY 9,7-9,75/tonne. However, in the second half of 28, the worldwide financial crisis severely affected China s domestic textile industry. Export markets were closed, while domestic markets could not digest existing capacity, so numerous textile companies were closed during the winter, leading to a dramatic oversupply of PTA, and sharp imbalance between supply and demand. In this context, many large enterprises, such as Hualian Sanxin, began restructuring. China s Central Bank cut interest rates several times and the government lowered export tariffs again, but the market remained gloomy. Prices fell to CNY 4,3-4,35/tonne in the second half of November, a lowest level of the year. Before the end of 28, prices rebounded to CNY 5,45-5,55/tonne. Domestic capacity increased by 1.65 million tonnes, to million tonnes in 28, while output totaled 9.83 million tonnes. The unbalanced supply-demand resulted in a volatile PTA market throughout 28. The Chinese Central Government implemented numerous policies to stimulate the market, including cutting interest rate cuts and raising export rebates, but these actions have yet to produce results. Players realize demand is still the key to push prices back up. However, the recent strong demand was attributed to sharply curtained supply. Asian PX operating rates were kept low amid the global financial crisis, hampering PTA operating rates. Some suppliers oversold as they were scared by plunging prices in the second half of 28, resulting in shortage of PTA supply in late 28 and early

14 9211 China PET Monthly CBI China The shortage triggered a buying spree among downstream polyester producers before the Chinese Lunar New Year. Recently, restrictions in 29 contract negotiations promoted purchases in PTA spot markets, helping PTA prices to rebound. It is too early to forecast the recovery of PTA spot markets because demand remains weak. PTA suppliers and polyester producers are transferring inventories, but the textile industry will still be in trouble during 29 due to the stagnant global economy, lower crude oil prices, and other factors. The tightness of PTA supply will extend beyond Chinese Lunar New Year and prices will remain soft. PX price increases are now stable but will rise at a slower pace in the second half of February as operating rates improve. Another political factor influencing prices is any duty adjustment and uncertainty over whether or not China will initiate an anti-dumping investigation on Korean PTA/QTA products. To sum up, PTA prices will continue rising in short term, driven by feedstock supply and related policies. However, in a long run, more factors will impact the market and their total impact is unknown. Date: 22 January MEG Price Trends and Supply MEG import prices hit an annual high of $1,19/tonne in the first half of June and then fell to $41/tonne at the end of October. Prices rebounded in November to above $5/tonne. What attributed to the recovery when oil prices dropped in November? The top 5 suppliers to China (Saudi Arabia, Taiwan, Korea, Canada, and Iran) have not changed, but their import volumes have, according recent customs data. Volumes from Saudi Arabia in November were 185, tonnes, increasing around 32, tonnes from October. November volumes from Taiwan totaled 7, tonnes, down by 57, tonnes from October. Volumes from Korea and Canada fell 1, tonnes and 3, tonnes, respectively, from October. November volumes from Iran increased 3, tonnes from October levels. Total import volumes to China during October were 412, tonnes, and 388, tonnes in November. The volume of imports from Saudi Arabia and Taiwan changed significantly. Output in Taiwan shrank to around 57, tonnes as Taiwan Nanya s MEG unit in Mailiao was shut down for maintenance. The unit has four production lines, and one 7, tonnes/year line is running normally while the other three, each capacity of 3, tonnes/year, were shut down for maintenance in mid-august. Taiwan is the largest supplier to China s MEG spot markets, and its supply volumes have direct impact on purchases of at least 3% of China s MEG spots. Fewer volumes were imported from Thailand in November as TOC s 3, tonnes/year MEG unit in Rayong was shut down for maintenance from 11 September and only restarted on 17 November. In addition, the volatile political situation in Thailand also hampered exports. Imports from the US were a mere 8, tonnes in November, due to plant issues and capacity allocation problems. Although imports from Saudi Arabia and Iran increased, these amounts had little impact on China s MEG spot markets, since these cargoes were mainly supplied as contract goods. Massive restocking by downstream buyers took place after Christmas and New Year s Day, leading to stronger demand for MEG. Accordingly MEG prices rose on reduced supply and increased demand. After the massive restocking, China welcomed the Lunar New Year holiday and downstream textile producers stopped production for the holiday. It is expected MEG imports will show a rebound in January but the prices will be down from December. Date: 13 January 14

15 6. Appendix PTA Plants Maintenance List Unit: tonnes/year Plant Location Capacity Remark Xianglu PC Xiamen 1,5 Shut down from 1 Jan. to 18 Jan. BP Zhuhai #1 Zhuhai 5 Shut down from early Feb. BP Zhuhai #2 Zhuhai 9 Restarted from end Jan. Hualian Sunshine #3 Shaoxing 6 Shut down at the end of September; Restart time was not announced Ningbo FCFC Ningbo 6 Test running Sinopec_Yangzi PC 2# Nanjing 35 Turnaround; Restart time was not announced Sinopec_TPCC Tianjin 34 Shut down since mid-september and might be restarted in March PetroChina_Liaoyang PC #1 Liaoyang 27 Shut down from the end of November and might be restarted in 29 FCFC #2 Mailiao,Taiwan 5 Shut down from the end of Oct. and restarted in Jan. CAPCO #1 Kaohsiung,Taiwan 25 Shut down from late August; Restart time was not determined CAPCO #2 Kaohsiung,Taiwan 25 Shut down from late August; Restart time was not determined CAPCO #3 Kaohsiung,Taiwan 25 Shut down from early October; Restart time was not determined CAPCO #4 Kaohsiung,Taiwan 25 Shut down from early October; Restart time was not determined CAPCO #5 Kaohsiung,Taiwan 4 Shut down from August; Restart time was not determined CAPCO #6 Taichung,Taiwan 7 Restarted from 11 Jan. but shut down again on 2 Jan. KP Chemical1# Ulsan,Korea 25 Switched to produce PIA KP Chemical2# Ulsan,Korea 35 Planned to shut down in Feb. for 14 days KP Chemical3# Ulsan,Korea 5 Shut down from the end of Dec. and restarted in 12 Jan. Samsung PC #2 Ulsan,Korea 45/5 Shut down from 8 Jan. for two weeks Samsung PC #4 Daesan,Korea 7 Shut down from 9 Jan. for ten days Samnam PC #4 Yosu,Korea 55 Shut down from 26 Jan. for ten days Mitsui Chemicals #1 Iwakuni,Japan 19 Shutdown Mitsui Chemicals #2 Iwakuni,Japan 16 Restarted in early Jan. PT Mitsubishi Chemical2# Merak,Indonesia 32 Shut down at the end of Jan. for one week MCPI Haldia, India 47 Shut down from 22 Jan. for two weeks RIL Haldia, India 72 Shut down from 8 Jan. to 15 Jan. Polyprima Karyareksa PT Karawang,Indonesia 35 Shut down from October 27; Restart time was not determined 15

16 MEG Plants Maintenance List Unit: tonnes/year Plant Location Capacity Time Shanghai PC Shanghai 38 Shut down in middle Oct. and restarted on 15 Jan. YPC-BASF Nanjing 3 Shut down from 8 Jan. to 25 Jan. Maoming Petrochemical Maoming 15 Shut down from 28 Nov. and restarted on 1 Jan. Beijing Eastern Beijing 4 Reduced operation rate to 5% from late Novebmer Beijing Yanshan Beijing 7 Reduced operation rate; exaxct volume and time was not determined Jilin PC Jilin 16 Reduced operation rate to 7% from early Novebmer Nan Chung (Nan Ya+CMMFC) Mailiao,Taiwan 3 Shutdown Nan Ya Plastics #1 Mailiao,Taiwan 35 Restarted from mid-december Nan Ya Plastics #2 Mailiao,Taiwan 3 Shutdown Nan Ya Plastics #4 Mailiao,Taiwan 7 Normal production Sharq 4(with MITSUBISHI) AL-JUBAIL 7 Put into production in the Q1/Q2 of 29 Sabic Yansab Yanbu 7 Put into production in the Q1/Q2 of 29 PetroRabigh Rabigh 6 Put into production in the Q1of 29 Formosa Plastics Pt. Comfort 36 Shut down from early September; Restart time was not determined PET Plants Maintenance List Unit: tonnes/year Plant Location Capacity Product Time Xiamen Xianglu Fujian 16 PSF Shut down from 31 Nov. to 1 Feb. Shanghai Lianji Shanghai 3 PSF & SD Chip Shut down again in 17 Jan. and would be restarted after Chinese New Year Chuzhou Anbang Anhui 2 PSF Shut down from 1 Jan. to 4 Feb. Jiangnan High Polymer Firber Jiangsu 3 PSF Shut down from 18 Jan.to mid-feb. Jiangsu Shenghong Jiangsu 2 PFY Shut down from 8 Jan. to 8 Feb. Changzhou Zhaolong Jiangsu 5 SD Chip Taking three-day maintenance in mid-jan. Jinlun Fiber Fujian 2 PFY Shut down in mid-jan. for 3 days maintenance Hangzhou Xiangsheng Zhejiang 18 PFY Shut down from early Jan. to early Feb. Xinfengming Zhejiang 2 PFY Planned to take maintenance on 2 Feb. for one week Tianjin PC Tianjin 1 PSF Shut down from 18 September and planned to be restarted in 6 Mar. Wuxi Shenyang Jiangsu 2 PFY Shut down from 16 Jan. and planned to be restarted on 1 Feb. Jiangsu Shenjiu Jiangsu 4 PFY Planned to take maintenance on 6 Feb. for about 2 days Taicang Zhenhui Jiangsu 18 PFY Planned to take maintenance on 8 Feb. for one month Sichuan Polyester Sichuan 7 PSF Shut down from late July, restart time was not determined Zhejiang Far East Zhejiang 2 PSF & PFY Shut down from 4 August, restart time was not determined Fujian Baihong Fujian 2 PFY Shut down from 1 Jan. and restart time was not determined Zhejiang Daoyuan Zhejiang 18 PFY & SD Chip Shut down from 16 Jan. and planned to be restarted on 5 Feb. Jiangsu Huahong Jiangsu 3 PSF Shut down from 25 Jan. to early Feb. Changzhou Huarun Jiangsu 12 Bottle Grade PET Shut down from early June, restart time was not determined 16

17 China PET Related Products Imports and Exports Official Statistics 28 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 27 Totals PTA (HS Code: ) Import Quantity(toones) 41,99 431,61 484, ,96 391, , ,89 39, ,41 374,95 355,85 473,38 5,992,544 Value( USD) 336,885 37, ,89 471, , , , , ,95 311, ,76 262,598 5,288,397 Export Quantity(toones) 5,687 3, Value( USD) ,788 3, QTA (HS Code: ) Import Quantity(toones) 6,683 66, ,237 83,575 57,196 8,753 82,399 35,81 96,417 74,291 89, ,23 995,612 Value( USD) 49,831 56,168 97,697 77,184 55,61 82,13 92,363 4,73 92,72 62,124 54,688 65, ,649 Export Quantity(toones) 1, ,24 7,492 2,54 1,12 64 Value( USD) ,368 8,467 2,556 1,3 146 MEG (HS Code: 29531) Import Quantity(toones) 434, , , , , , , , , , ,839 38,218 4,81,754 Value( USD) 65, , ,28 613, ,84 516,12 5, ,41 414,82 335, ,47 175,53 4,853,413 Export Quantity(toones) 9, ,334 3, ,721 2,88 Value( USD) 13, ,894 3, ,98 4,45 Bottle Grade PET (HS Code: ) Import Quantity(toones) 2,947 1,224 1, ,978 3,42 2,272 1,715 1,198 1,336 1,788 1,268 25,634 Value( USD) 4,859 1,996 2,234 1,291 3,23 5,21 3,92 2,887 2,1 2,87 2,471 1,64 4,27 Export Quantity(toones) 62,549 54,275 89,677 88,618 83,489 74,36 75,719 64,6 41,726 51,426 44,377 42,37 722,314 Value( USD) 84,17 72, ,44 119, ,886 15, ,471 96,975 59,754 67,178 49,261 4, ,713 Other PET Chip (HS Code: ) Import Quantity(toones) 9,293 7,918 14,424 14,612 23,984 22,93 22,925 23,393 18,324 21,4 17,574 1,65 268,591 Value( USD) 12,542 11,412 19,572 2,859 32,853 31,87 33,31 34,849 26,286 28,788 18,536 11, ,62 Export Quantity(toones) 12,983 14,696 11,872 15,221 12,13 16,156 17,918 13,956 16,2 16,578 15,444 22,68 298,28 Value( USD) 18,436 2,993 17,269 22,215 17,353 23,715 27,653 22,483 24,881 23,468 18,338 23, ,135 Uncard PSF (HS Code: 5532) Import Quantity(toones) 11,944 15,343 14,118 12,78 11,1 13,16 13,388 1,38 12,4 1,867 9,78 12, ,36 Value( USD) 17,758 15,343 21,64 19,515 17,741 2,652 21,556 17,967 19,612 16,813 14,74 15, ,618 Export Quantity(toones) 4,283 27,138 38,457 36,552 37,694 35,19 49,51 42,217 39,789 38,485 29,59 29,63 39,919 Value( USD) 49,258 33,834 47,59 45,836 48,175 44,381 64,374 57,72 52,52 49,562 35,115 31,752 45,192 Recycled PET (HS Code: ) Import Quantity(toones) 72,682 71,181 91,453 93,233 92,386 84,249 16,119 89,48 16,445 11,9 8,185 72,52 1,18,15 Value( USD) 45,595 45,726 6,39 64,44 67,79 62,249 79,63 68,53 81,539 76,913 52,675 33, ,229 Export Quantity(toones) ,423 Value( USD) O/R, Sales Ratio and Inventory of PET Plants Date PET Fiber PET Bottle Average PFY PSF SD Chip PET Bottle Average PFY PSF SD Chip PET Bottle Jan-9 1st Week 77.5% 6.% 74.6% 11.% 85.% 95.% 95.% 9.% 2nd Week 75.6% 6.% 73.% 1.% 87.5% 95.% 85.% 85.% 3rd Week 75.6% 6.% 73.% 1.% 9.% 95.% 85.% 85.% 4th Week Operation Rate Sales Ratio Inventory (day) Monthly Average 76.3% 6.% 73.5% 13.3% 87.5% 95.% 88.3% 86.7% Dec-8 Monthly Average 75.% 63.8% 73.1% 83.8% 95.% 91.3% 87.5% 88.1% Up(>5 days) Slightly Up(1~5 days) Stable(-1~1day) Slightly Down(1-5 days) Down(<5days) NOTE: CBI adjusted our statistics method of polyester plants operation rate, sales ratio and inventory from the fourth week of August. The old method is established two years ago. However, the market changed a lot in this two year. As such, CBI established a new method of data statistics according to current market structure. In order to avoid our gathered data go away from real data. 17

18 Abbreviations CIF CFR CMP DVD EXT T/A O/R YTD YoY FOB Cost, insurance & freight to a port Cost and freight to a port China main port Prices for delivery to the destinations, including freight Ex-works prices, prices for pick up at the plants, excluding freight Turnaround Operating rate Year-to-Date, for the period starting January 1 of the current year and ending today Year-on-Year, compare with the same period of last year Free on board About ICIS Services *************************************************************************************************************************** ICIS's joint venture with CBI China is now China s leading commodity market information company. ICIS news - the breaking news service for the global chemical industry, providing the latest chemical news, information, data, market movements and analysis in one place. Please contact: (Europe); (Asia); (US) or csc@icis.com for a free trial to ICIS news. *************************************************************************************************************************** 18