Taiwan Covid-19 surge: Impact on polyester industrial chain

Taiwan on Monday confirmed 335 new cases of COVID-19, of which 333 were classified as domestic infections, breaking its daily record of local cases for the fourth consecutive day and pushing the total number of cases past 2,000.

Taiwanese authorities imposed new social distancing measures on May 15, closing bars, clubs and gyms around the island, and restricting indoor gatherings in Taipei and the surrounding New Taipei City to five people. In Taipei, people must wear masks outdoors -- failure to do so is punishable by a fine of 3,000 to 15,000 New Taiwanese dollars ($107 to $535). All schools and kindergartens in Taipei and New Taipei will be closed for two weeks starting from May 18, and several local councils have also been suspended.

Will the biggest outbreak of the epidemic have an inevitable impact on the polyester industry? How will the production and consumption be impacted?  

PX

There's only one PX producer in Taiwan, i.e. Formosa Chemicals & Fiber Corporation (FCFC), which has 1.97 million mt/yr of PX capacity located in Mailiao. The PX is mostly used internally, supplied to its 1.25 million mt/yr PTA plant in Taiwan and 1.2 million mt/yr PTA plant in Ningbo, Zhejiang Province. Therefore, Chinese mainland imports about 1 million tons of PX a year from Taiwan. Currently, the company's PX units are running stably, but one 720kt/yr PX line is scheduled for maintenance in July, and another 950kt/yr line for maintenance from end Q3. The pandemic now has little impact on the company.

PTA

Taiwan’s PTA capacity totals 3.95 million tons and all PTA units run normally, except for CAPCO’s 700kt/year unit running at 90%. But the export volume of PTA slightly reduces due to the outbreak of epidemic in Asia. Formosa Chemicals and Fibre Corp. (FCFC) plans to shut its 550,000 mt/year PTA plant at Mailiao for scheduled turnaround later.

The operation of polyester upstream and downstream factories has not been affected temporarily, but the lockdown may is bound to cause overall consumption to decline. In addition, Taiwan is a major importer and exporter in Asia. Currently, shipping costs have increased, but the increase is not as high as that in the mainland. If the epidemic continues to worsen, it may affect the efficiency of port handling and shipping costs, and will affect the global distribution of various products.

MEG

The COVID-19 situation was severe recently in northern part of Taiwan. But MEG plants are mainly in central Taiwan and are now running normally. Taiwan's MEG capacity totals 2.4 million mt/year. In addition to consumption in Taiwan, most cargoes are sold to Chinese mainland market with monthly average export around 80-90kt in 2021. However, Nan Ya Plastics will have its annual maintenance since the end of May. No.1 unit would be shut on May 28 for 15 days of maintenance, No.2 unit on May 24 for a month and No.3 plant on June 15 for a month. The capacity of maintenance totals 1.08 million mt/year. Taiwan's MEG exports will decrease in June and July.

Polyester

Polyester capacity amounted to 4.63 million tons/year in Taiwan, China. Factories expressed that the pandemic and large-scaled power outage did not impose great influence temporarily. Serious drought remained recent market focus.

Taiwan has a total of 1.62 million tons/year of PET bottle chip capacity. At present, the epidemic basically has no impact on the operation of local PET bottle chip plants. However, the island is mainly concerned about the problem of water shortage, which does not affect the operation of specific units for the time being, but if drought continues, some plants may face problems.

All in all, the pandemic does not impact the production on polyester upstream and downstream market temporarily in Taiwan, China, while the lockdown tends to drag down consumption. In addition, Taiwan is big import and export province in China. Sea freight keeps hiking but the increment in Taiwan, China is lower than that in Chinese mainland. Most local companies are giant enterprises and enjoy strong voice, able to negotiate with shipping companies during actual transactions. If the pandemic continues deteriorating, the handling efficiency at ports and sea freight is likely to be affected, which will periodically impact the deployment of various goods in the world.