COMPANIES ASIA-PACIFIC: Chinese groups to boost PTA production
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By Richard McGregor in Shanghai
Financial Times; Sep 30, 2003
Chinese private companies are readying major investments in the man-made fibres business, some in defiance of central government guidelines aimed at controlling an overly rapid expansion of the industry.
The proposed new plants, mainly in Zhejiang province, near Shanghai, could see China manufacturing about half of the global output of purified terephthalic acid (PTA) by 2006, up from just a quarter in 2000.
PTA is the raw material used to manufacture the polymers that make textiles, and also some bottle, packaging and film products.
The planned investments are a sign of robust confidence in China in the domestic market, and also for continued growth in textile exports, despite political tension in the US and elsewhere about rising Chinese sales.
China's textiles exports, including all fibres, rose from $16bn in 2000 to $20.5bn in 2002, and could grow further with the removal of quotas under World Trade Organisation (WTO) rules.
China is now a large net importer of PTA, with about half of this year's domestic demand of 8m tonnes to be sourced overseas.
The State Development and Reform Commission (SDRC), which oversees the industry, has approved four new plants to be built in the next two to three years to increase local output.
The approved new investments include more than doubling the output of a $300m plant opened just last month in Zhuhai, near Hong Kong. The plant is 85 per cent-owned by BP, the oil and petrochemicals group.
But with polyester demand rising about 12-14 per cent a year in China, some local companies have tired of the SDRC's lengthy approval process, and are planning to build plants regardless of Beijing's rules.
Heng Sheng, a joint venture between two privately owned textile manufacturers in Ningbo, Zhejiang province, has already secured land for its plant, with the backing of local authorities.
"The company seems to be going ahead, regardless of Beijing's approval," said an official with the planning department of the Ningbo local government.
"The central government should be happy that they will reduce the very high import bill."
The companies will not qualify for tax concessions without central government approval, but calculate the market will be strong enough when they come on line in 2006 to be profitable.
A foreign executive whose company sells equipment to the PTA industry, estimated that up to 13 new plants were on the drawing board for construction in the next two to three years, although not all would go ahead. "The wave they want to catch is the end of 2005 - that's when you should be able to get the highest price," said the executive.
The possible unregulated expansion of PTA plants is already causing concern among investors like BP, which have gone through the lengthy central government approval process.
Steve Welch, a vice-president at BP Petrochemicals, said at a conference in Shanghai this month that new plants bypassing Beijing "could unfairly advantage those who follow official channels". |
