China’s petrochemical producers, which supply textile and plastics factories, have cut operations to their lowest seasonal level in three years as rising feedstock costs and soft export demand squeezes margins.
Several major makers of purified terephthalic acid — including one of the largest, Hengli Petrochemical Co. — have taken some units offline for maintenance, removing about 20% of national capacity, according to local industrial news outlet Welink. The industry’s operating rate has dropped as low as 68%, it said.
Hengli didn’t immediately reply to an email seeking comment.
Brent crude has gained about 30% since Israel and the US first attacked Iran at the end of February, hampering supplies from the Middle East. PTA futures have risen less than a quarter in the period, to their highest since late 2022, squeezing margins for petrochemical producers.
Hengli relies entirely on imported crude, mainly from the Middle East, to produce PTAs. The firm’s revenue slumped last year, partly because of a limited ability to pass through higher costs, it said in earnings released on Tuesday.
Some producers have pivoted to specialty chemicals. Jiangsu Eastern Shenghong Co. announced a 13 billion yuan ($1.9 billion) investment last week to extend into polyurethane and engineering plastics for mattresses and refrigerators, taking on Wanhua Chemical Group Co., which has dominated the petrochemicals sector thanks to its high-end, tech-driven products that are structurally less vulnerable to China’s aggressive price wars.
China’s textile exports fell last month, according to customs data, adding to the petrochemical sector’s woes. Producers are also struggling with oversupply in low-end bulk chemicals.
Written by: Bloomberg News
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