Mitsubishi Chemical has signed a feedstock supply agreement with Chinese state-owned oil company CNOOC to put its local production of purified terephthalic acid (PTA) on a more cost competitive footing.

In 2015, CNOOC plans to start up a refinery complex at Ningbo, in China's Zhejiang Province, from which it will supply more than 1 million t/y unit of paraxylene via pipeline to Mitsubishi's nearby PTA plant.

Mitsubishi produces some 600,000 t/y of PTA in China to feed its production of polyester fibers and PET bottle resin, currently buying PX from a number of suppliers. In future it will make its bulk purchases solely from CNOOC.

With the implementation of the deal, Mitsubishi has said it may cut back PTA production in South Korea, from where it has been shipping to China. Of late its profits have been deteriorated due to Chinese competitors ramping up production and creating a glut market.

With the pipeline eliminating shipping costs, the chemical producer hopes to return the business to profit by 2016. Mitsubishi said it also may start exporting surplus PTA to other Asian countries.

The Japanese company's has annual sales of PTA total about $2.73 billion.