Polyester producing companies have cut production by 40 per cent in the last three months due to the acute shortage of key raw material PTA (purified terephthalic acid) supplied by oil refining companies. Oil refineries have cut production in some of their units for various reasons. Reliance Industries, the largest producer of PTA, cut production between March and May for two weeks each and is allocating only 50 per cent of its supply.
Polyester manufacturers require 5.3 million tons of PTA per annum. The anti-dumping duty of 15 per cent levied in December has made import of PTA unviable for the polyester industry. Unlike other PTA users, polyester companies cannot afford imports after the anti-dumping duty as they are operating at a wafer-thin EBITDA margin of six to seven per cent.
A steady supply of PTA is key to operating a polyester plant as it is a continuous process and cannot be shut and restarted at will. So the industry wants the anti-dumping duty revoked. Of the annual installed polyester production capacity of 8.4 million tons, companies have produced only 5.8 million tons due to the raw material shortage.
While import of PTA attracts a duty of 15 to 20 per cent, imports of paraxyle, which is the raw material for producing PTA, are allowed duty free.