Coronavirus impact: PTA prices decline by 10% in a week on duty cut

Decline in crude prices also contributes to lowering the key textile raw material

In a major relief to synthetic yarn manufacturers, Purified Tephthalic Acid (PTA) has become cheaper by 10 per cent during the past one week following temporary suspension of import from China due to the spread of coronavirus there. Withdrawal of anti-dumping duty on this critical synthetic textile raw material has made it cheaper in India.

Trading currently at $600-$620 a tonne, PTA prices has slumped from around $660-$700 about a fortnight ago. PTA prices are determined by the movement in crude oil prices which have also slumped by 10-12 per cent in the past one week. Since PTA is linked to crude oil, its prices are quoted in dollars even by domestic manufacturers.

Synthetic yarn manufacturers attribute the PTA price decline to the abolition of 2.5 per cent of anti-dumping duty by the government, proposed in the last Union Budget announced on February 1. Apart from that, PTA import has also come to standstill due to the coronavirus outbreak in China, the world’s largest exporter. Indian producers have sufficient stock to meet the import component of supply to synthetic yarn makers, and offset the impact of temporary import suspension.

“PTA prices have dropped by almost 10 per cent since eruption of the coronavirus epidemic in China. The Indian government’s move to abolish anti-dumping duty has also supported the price decline, apart from the fall in crude oil prices. Prices of other polymers have also declined. Producers were charging us $30-40 a tonne as anti-dumping duty on PTA,” said Madhusudhan Bhageria, Chairman and Managing Director, Filatex India Ltd.

Meanwhile, experts believe the abolition of duty on PTA will boost the profitability of synthetic yarn manufacturers. Demand will rise due to low raw material cost and benefits will be passed on to consumers.

“The abolition of anti-dumping duty on PTA will make its availability to the industry at competitive prices and give a boost to downstream value added product. Additionally, the scheme for remission of duties and taxes on exported products will be launched this year which will refund levies such as electricity duties and value added tax (VAT) on fuel used for transportation. The textile players do not get such refund as of now. Such benefits will certainly go a long way in improving the competitiveness of the textiles products in the export markets,” said K.V.Srinivasan , Chairman, Cotton Textiles Export Promotion Council (Texprocil).

When prices go down, some extra demand gets created. Hence, synthetic textile manufacturers would get benefit of the additional demand which will help boost their profits in coming quarters.

T Rajkumar, Chairman, Confederation of Indian Textile Industry (CITI) believes that if Indian textile industry has to achieve the market size of US$ 350 billion by 2025, it couldn’t have been done by without making our raw material available at an internationally competitive price.

With an installed capacity of around 5 million tonnes, Indian producers including large crude oil refiners utilizes around 80 per cent PTA capacity. China has a production capacity of 45 million tonnes of which 35 million tonnes is consumes locally. The remaining quantity 10 million tonnes is used for exports.