Several petrochemicals company in Taiwan are racing to set up plants in China to expand their existing business. The mainland authorities recently gave British Petroleum Plc (BP) a green light to expand output at its purified terephthalic acid (PTA) plant in Zhuhai, Guangdong Province.

BP's move has encouraged Taiwan's Far Eastern Textile Co., the flagship of Far Eastern Group, to fast-track plans to establish a PTA plant in Shanghai. Formosa Chemicals & Fiber Corporation (FCFC), an affiliate of the petrochemical giant Formosa Plastics Corp., will apply with the mainland government for approval to set up a PTA plant in Ningbo, Zhejiang Province.

The booming polyester industry in China has fueled strong demand for PTA, ethylene glycol (EG) and other raw materials used to make polyester. The mainland currently imports 4 million metric tons of TPA and half as much EG to meet domestic demand. Earlier this year BP completed a PTA plant in Zhuhai with an annual production capacity of 450,000 metric tons. Output will rise to 1 million metric tons after the latest expansion, which is expected to be completed by late next year or early in 2005. China's Yizheng Chemical Co. recently completed a PTA plant in Shanghai. Far Eastern plans to set up a PTA plant in Shanghai with an annual capacity of 500,000 metric tons.

After a brief delay due to the outbreak of severe acute respiratory syndrome (SARS), the project is now moving forward, with production scheduled to begin in two years, according to company chairman Douglas Tong Hsu. FCFC's plan to set up a PTA plant in Ningbo with an annual production capacity of 500,000 metric tons is still awaiting approval by the mainland authorities. FCFC produces 2.1 million metric tons of PTA annually, putting it on par with China American Petrochemical Co.

The company said approval to set up a PTA plant in the mainland would strengthen its lead as Taiwan's largest producer of PTA. The rush to increase PTA output has so far not dampened the rise of PTA prices. The material is currently quoted at between US$560 and US$570 per metric ton. An industry observer predicted that PTA prices would be flat next month.