India's PTA downstream players mull run cuts as margins weaken

This content is part of the WPC 2025 series, where we explore key themes from the 40th annual World Petrochemical Conference.

India's purified terephthalic acid downstream polyester producers are considering lowering production rates in the coming weeks, pressured by eroding margins and swollen stockpiles, sources told Platts, part of S&P Global Commodity Insights.

Downstream producers are deeply concerned about falling margins, prompting them to consider lowering production run rates, market sources said.

Until recently, most Indian polyester plants were operating at around 85%-90%, though a cut in run rates is expected to occur soon, according to a producer.

"Lowering run rates of polyester plants is not an easy decision, as it affects the quality of the end product. It must be a well-thought-out decision," the producer said.

Some producers have already reduced their run rates to around 70%-75%.

The main driver for this decision is weak demand for fabrics and polyethylene terephthalate bottles in the domestic market, further worsened by a poor export environment, sources said.

"There is a buildup in inventories of both PTA and polyester fabric in the country following large imports of the material over the past few months," a PTA buyer said.

India exported around 35,000-37,000 mt/month of fabric in September and October last year, but this fell to 27,000 mt in December and further dropped to 22,000-24,000 mt in January this year, market sources said.

The country's blazing hot summers are typically a boom season for PET products, but demand has not picked up much so far.

"Margins for PET bottles are anyway not that great," a PET producer said, adding that a deluge of cheaper imported PET bottles each year further damages margins for domestic producers.

PTA term contracts in limbo

While the decision to curb polyester production has spooked downstream players, upstream PTA producers are becoming increasingly anxious.

Delays in finalizing PTA term contracts for 2025 are expected to persist as the price spread between international PTA sellers and Indian buyers has widened again, traders said.

"If I were to include all the spot and contractual conversations lately, they have been at [around] PX [paraxylene] plus $93-$98/mt, and more granularly at PX plus $95-$97/mt," a major Indian PTA buyer said. "Now, we will wait for a bit."

Due to the volatility in PX prices over the past few years, Indian PTA buyers and international producers have adopted a PX-linked pricing mechanism.

"I had bid for a spot cargo at PX plus $91/mt when it was being offered at PX plus $95/mt, but I withdrew my bid," another India-based PTA buyer said. "I am not going to buy even at PX plus $90/mt right now."

"The market is very bad currently; there is a massive buildup of PTA and polyester inventories, poor margins even in the domestic market and little likelihood of improvement in the near term," a fourth PTA buyer said.

PTA imports into India, however, have been steadily rising despite the grim downstream scenario.

According to the latest government customs data, India imported around 161,771 mt of PTA in November. Market sources said imports were around 270,000 mt in December, 220,000 mt in January and above 200,000 mt in February.

"The main reason for such massive imports is shipments on breakbulk over the past few months, when container freights had surged," a trade source said.

Flush with supplies, the upcoming turnarounds for Indian PTA and polyester producers are unlikely to tighten the market much, buyers and traders said.

With a couple of festivals approaching in India, a labor shortage is a possibility at polyester plants during this time of year, sources said, adding that this, in turn, dents consumer buying power.

Market participants are mainly waiting for a revival in consumer demand to support the entire sector, they said.

Slowdown in Asian PTA market

Outside of India, the PTA market offers little hope, as the Chinese downstream polyester sector struggles with poor demand in the region, sources in China said.

To address rising PTA inventory, several producers in China have opted for turnarounds over the next two to three months, despite the peak summer demand season approaching, a trader in Singapore said.

"Not sure what the Far East market is doing, [but] PTA plants have shut and have balanced off PX now. It is a different market," the trader said.

"Margins for PTA were pretty bad, [and] also PET, [as] it was oversupplied," a second trader in Singapore said.

Platts assessed PTA CFR China at $633/mt on March 10, down $2/mt from March 7, while PTA CFR India was assessed at $703/mt, down $2/mt over the same period.