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Insight | Time: Mar 26 2020 4:16PM
Impact of India's lockdown on China PX and PTA industry
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India’s Prime Minister Narendra Modi on Mar 24 evening announced a 21-day nation-wide lockdown to curb the spread of the coronavirus. The government previously announced on Mar 22 lockdown of New Delhi, Mumbi and major cities from Mar 23 till Mar 31, to slow the spread of coronavirus and refrain infected people from moving. According to the data, the total number of COVID-19 cases in India have risen up to 536 as of 08:00 AM, Mar 25.

After the Mar 22 announcement of city lockdowns, India’s Directorate General of Shipping (DGS) imposed quarantine on shipping vessels from ports of infected countries including China for 14 days starting from the date of departure from the infected ports. It remains to be seen whether India will become stricter in dealing with shipping vessels after the announcement of nation-wide lockdown.

Relationship between India and China in terms of PX and PTA

PX: India takes up to about 8% of world’s total PX capacity, as world’s third largest PX producer following China and South Korea.

India is one of the major suppliers of China’s PX imports.

In 2019, China received 1.28 million tons of PX from India, accounting for about 9% of the total. It made India the third largest origin of China’s PX imports, following South Korea and Japan.

India's PTA capacity is 6.18 million tons per year. However, due to India's anti-dumping policy on China's PTA, the PTA exports to India is not too large. In 2019, China's total PTA exports to India were around 41,000 tons, accounting for about 6% of China's total exports.

Impact of lockdown in India: It is reported that three petrochemical plants in India have declared force majeure, mainly involving olefin products. At present, no PX suppliers announce force majeure or reduction in production. MCPI's 1.2 million tons/year PTA plant has announced force majeure. It is reported that the company is discussing the specific time of close. Some South Indian yarn mills have announced production suspensions, and some ports have announced force majeure on March 25. According to market sources that India's polyester polymerization rate has also dropped significantly. Therefore, the impact of India's lockdown in the future may further increase.

For PX, the direct impact that it may bring is on its exports, which depends not only on India’s port policy, but also on the overall local demand in the later period. After all, similar to China, the impact of lockdown on downstream consumption is more obvious. If the impact on the export ports and shipping is not significant, unless the PX suppliers determine to significantly reduce production, otherwise the possibility of an increase in PX exports may still exist.

For PTA, although the export volume that directly affects the Chinese mainland may not be obvious, the main PTA import origins of India are South Korea and Taiwan (the average monthly total imports of India from the origins in 2019 totaled 43,000 tons). If India could not consume the amount, it means that South Korea and Taiwan need to find other export destinations. Mainland China is also an attractive market.

For China itself, India is also currently the main export market of some polyester products. India's PET bottle chip imports from China account for 9% of total China's exports, the largest importer; staple fiber accounts for nearly 8% of total exports. Polyester POY and industrial yarns exports to India also exceeded 5%. India ranked among the top five major importers of these products.

The impact of India's lockdown needs to be further observed and clarified. The operation of the entire local polyester industry chain in India will be updated later. So stay tuned.
[RISK DISCLAIMER] All opinions, news, analysis, prices or other information contained on this report is provided by analyst of Zhejiang Huarui Information Consulting Co., Ltd (CCFGroup) as general market commentary and does not constitute investment advice. CCFGroup will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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