United States oil giant Amoco says its multi-million dollar chemical joint venture in China, due to start production in 1999, will benefit from a price recovery over the next two to three years. Amoco Chemical Asia-Pacific China projects director Matthew Chu Chai-tou said the purified terephthalic acid (PTA) plant in Zhuhai would escape the cyclical downturn. PTA is used to make polyester fibre and container resin. The price of PTA has dropped about 50 per cent over the past 12 months to US$510 a tonne. 'China is a place for long-term investment. We do not consider too much about short-term market fluctuations,' Mr Chu said, adding PTA demand would outstrip supply in the country over the next 10 years. The plant, the mainland's largest foreign-funded chemical joint-venture project, was approved by the State Council in March after eight years of negotiation. It is strategically located in the south because demand in the region is particularly strong and market potential huge. There is no other PTA plant in the area. 'China has a high demand for PTA and can sell as much as it can produce,' Mr Chu said. 'Current demand in the southern region is strong enough to absorb the production from our plant.' According to a study, China has an annual production capacity of about 1.26 million tonnes. This does not include a 250,000-tonne refinery in Liaoyang, Liaoning province, which is scheduled to begin operation this year. PTA demand this year is forecast at 1.35 million tonnes, growing at an annual 14.5 per cent to 2.03 million tonnes by 1999. Average growth of 10 per cent is expected over the next 10 years. Amoco's 80 per cent owned Zhuhai venture will have an annual production capacity of 250,000 tonnes of PTA in the first unit. A previous feasibility study put the investment cost of the first phase at $300 million, representing Amoco's first PTA investment and the largest in the manufacturing sector in China. About 80 per cent of production is expected to be sold on the domestic market. A key raw material, paraxylene, in short supply in China, will be imported for the venture. Mr Chu said there should not be a big foreign-exchange problem because the project was allowed access to China's interbank system. Projects of this size usually have a pay-back period of eight to 10 years. Mr Chu said the plant site was large enough for four PTA units. The company is continuing to look for opportunities in other PTA, paraxylene and polypropylene projects in China.