Reliance's plant maintenance to affect PX supply

On Sep 2 evening, news of Reliance’s PX plant maintenance ripped through the market. As a result, China PTA futures surged on evening trading session, with 2301 contract advancing 3.67%. Though it is hard to say how much PTA futures were driven up by the news, the impact is strong.

Reliance scheduled maintenance for its PX plants earlier, but it has not yet announced the details about the maintenance including the time, duration and any cuts of contract good delivery. In addition, the maintenance has been delayed for several times, and there’s no official confirmation on the schedule. However, the operating rate of its PX plants have been reduced from nearly 100% to 80-85% in early Aug.

With no official confirmation, there are some rumors in the market about the maintenance. Some say the maintenance could last for 20 days, and others say 30 days; some participants say the plants would shut while some believe the plants would keep running with reduced operating rate. It is likely that the plants could be shut for maintenance in Sep. Then, what’s the impact on basis of 30-day shutdown of the plants with combined capacity of 4.35 million mt/yr?

1. As for India, Reliance, with PX capacity of 4.35 million mt/yr, takes up 56.7% of the total. If OMPL’s 920kt/yr PX capacity is excluded from the total PX capacity in India since it has been shut since Nov 2021, Reliance’s share would further increase to 92.6%. Then, the shutdown would deal a severe blow to local PX supply.

India, as a net exporter of PX, exported about 148kt of PX per month in the first half of 2022, down by 30% from the monthly average in 2021. The shutdown could theoretically affect its supplies to overseas countries, as the top three destination markets received 75% of India’s PX exports in the first half year. However, as the maintenance was scheduled earlier, buyers could have prepared in advance and thus the impact could be smaller than expected.

Reliance is also the biggest PTA producer in India, with capacity of more than 4.5 million mt/yr, accounting for 57% of total in India. There has been no news about PTA or polyester plant maintenance, however, PTA plant operating rate would inevitably be affected by PX plant shutdown. PTA plant operating rate is likely to cut if the plants are not shut. India also imports some PX, and according to China customs data, China exported about 30kt of PX to India in Jul. Therefore, the impact of Reliance PX plant maintenance could have little impact on other users.

2. As for China, its PX imports have decreased notably with increasing localization rate in recent years. Imports from India shrink even more obviously, from 65kt per month in 2021 to only more than 20kt per month in the first seven months of 2022. India’s share in PX imports of China has also dropped significantly from 9% in 2021 to less than 1% in 2022.

Nevertheless, the shutdown of Reliance’s PX plants would affect China’s imports though the quantity is not large. According to the investigation, China domestic PTA producers had earlier received notice about the maintenance and contract supply cuts, therefore, the news on Sep 2 evening was not a surprise to them. In addition, with tight PX inventory recently, some PTA plants have already lowered operating rates and cut production, which also cushions the impact of Reliance’s maintenance.

In the situation of tight PX supply, low PTA plant operating rate and tight PTA supply, any disruption of plant operations could bring great impact on the market. As for the progress of Reliance’s PX plant maintenance, it needs to be further watched closely.