Chinese PTA inventories continue to rise ahead of Lunar New Year amid downstream slowdown

Chinese inventories of purified terephthalic acid continued to rise amid limited respite, as downstream polyester activity declined at a faster pace, sources told S&P Global Commodity Insights Jan. 13.

As the Lunar New Year festivities draw closer, polyester plants in China have been hitting the brakes on production gradually, traders said.

However, PTA plants in China are unable to match the slowdown which in turn allows inventories to build with partial absorption of stocks taking place, a PTA producer in Asia said.

In the week to Jan. 10, PTA inventories in China were estimated at around 3.11 million mt, up from 2.98 million mt in the previous week, a Chinese broker said. The inventories breached 3 million mt for the first time since January 2024, according to market sources.

"Guess the polyester operation rate (OR) is dropping much more than PTA does therefore, PTA inventory is still rising even as PTA OR drops," a Chinese trader said.

In the week to Jan. 10, polyester plant operation rates had dropped to around 86% compared to 88% in the previous week. For the same period, PTA plant operation rates in China were at around 79.9% compared to 80.5% previously, the trader said highlighting the marginal drop in PTA operations.

Polyester plants normally see workers go back to their hometowns before the festive season which leads to stalling of production activity, sources said.

But unlike polyester plants, PTA plant activity may not soften as much as the former is considered to be more labor intensive, a second PTA producer said.

"No, PTA (OR) will not drop as much as the downstream does [as] the operation in the downstream relies more on people," the producer said.

PTA at full throttle

Some PTA plants are considering running at full during the festive season despite the higher buildup in inventory, some sources said.

"We will still be running full during the new year," another source with the second PTA producer said.

While some PTA plants have opted for turnarounds recently, there has been a slew of plants that have newly started up or restarted their plants after the turnaround as well.

China's Xin Feng Min group started production of purified terephthalic acid at its new 3 million mt/year line at Dushan in Zhejiang province in late December 2024, Commodity Insights previously reported.

A source at the company said that they plan to keep running at full over the next few weeks.

"[As] you know like our new PTA plant started so daily production volume will not drop," the source said.

However, a second Chinese trader anticipated that the increase in PTA stockpiles is unlikely to expand significantly.

"I think PTA inventories will still rise 100,000-200,000 mt in February," he said. "That's not much actually [and] even less than previously thought [of]."

Given that producers are struggling with choked margins, they will have to seriously consider curbing production after the festive break, he added.

"The supply side is more sensitive than the demand side at the moment," the trader said.