China’s polypropylene exports may double in 2024 amid rising consumption due to continuous capacity expansion

Continuous expansion in China’s polypropylene (PP) production capacity during the weak domestic demand period of the Covid-19 pandemic yielded a positive result for the world’s second-biggest economy. China is gradually becoming a major player in the global PP export market, despite a recovery in domestic demand with the turnaround in the country’s factory activities.

Following several years of continuous efforts with sustained expansion in production capacity, China has slowly become a net PP exporter, with shipments outpacing imports for the first time in March this year. PP exports surged by 87.6 percent month-on-month (mom) in March 2024, outpacing imports of 295,441 tonnes, which were up by 28.45 percent on the month but down by 10.58 percent year-on-year (yoy), according to data compiled by China’s Customs Statistics Information Centre.

This was not a one-time incident. The trend of surging exports and receding imports continued thereafter. China's PP export volume jumped to 251,800 tonnes in April 2024, registering a growth of 112 percent from 122,000 tonnes in the corresponding month of the previous year. However, when compared with the previous sequential month, total exports in April 2024 registered a decline of 63,700 tonnes which experts term as a ‘temporary' phenomenon due to high freight rates. Experts estimate a resurgence in China’s PP exports in May and June 2024.

It is worth mentioning here that China’s PP outflows were registered at 424,746 tonnes for the entire calendar year 2020. Between 2021 and 2023, the world’s second-largest economy focused on capacity expansions with a commitment to making China not only ‘self-reliant’ but also a large exporter of PP in the world by 2024 in a targeted manner. China sincerely did it without paying much attention to consumption markets, amid growing uncertainty in the world economy.

China leads global PP capacity additions
Global PP production capacity is poised to witness considerable growth over the next five years, potentially increasing from 97.65 million tonnes per annum (MTPA) to 159.22 MTPA in 2027, thus registering a growth of a staggering 63 percent in five years. So far, 159 planned and announced PP projects have lined up expansion projects scheduled to come on stream, predominantly in Asia, followed by the Middle East.

A total of 84 planned and announced new projects are scheduled to commence commercial production with a cumulative capacity of 42.95 MTPA during this period. Existing projects in this region are expected to expand their brownfield capacity by 0.38 MTPA by 2027. According to reports, China is scheduled to install 18.7 MTPA of new production capacities between the calendar year 2024 and 2026.

Producers such as Biofeng Energy, Shandong Yulong, and Beifang Huajin Chemical are scheduled to commence commercial production at various facilities with 1.5 MTPA, 1.1 MTPA, and 1 MTPA, respectively, in the calendar year 2024. ExxonMobil Hulzhou is also set to add 850.000 tonnes of new capacity in 2024. Another large plant will come from Zhongjing Petrochemical with a production capacity of 600,000 MTPA. A large number of PP producers have also announced to start commercial production on their plants with their standalone capacity between 200,000 and 450,000 tonnes in the calendar year 2024.

During the calendar year 2025, Zhenhai Refinery is scheduled to commence Phase II project with a cumulative capacity of 1.6 million tonnes, followed by 800,000 tonnes project is scheduled to come on stream each from Shandong Yulong Phase II, and Oriental Ningbo. There are several other projects with a separate capacity of 400,000-500,000 expected to commence production in the calendar year 2025.

Data compiled by GlobalData, a London-based research and consultancy firm, showed, China to lead global PP capacity expansions to the tune of 22.35 MTPA from 51 planned and announced projects. The main addition to the existing capacity will come from announced projects, such as the North Huajin refining and petrochemical polypropylene plant in Liaoning province, with a capacity of 1 MTPA. This plant is expected to commence commercial production in 2027.

Past trend
After achieving approximately 90 percent self-reliance in 2022, polypropylene (PP) producers in China have decided to gradually reduce plant capacity utilization to accommodate the slowdown in both domestic and international demand due to global economic weakness. However, Chinese PP producers will continue with capacity expansions to restore their operating rates in the future. The objective of this reduction is to prevent the market from falling into the grip of oversupply, which could lead to a substantial correction in global PP prices.

China’s self-sufficiency increased by almost 10 percent over the last two years, thanks to increased consumption driven by the brownfield and greenfield expansions in the downstream sector. The country’s average self-sufficiency level stood at 80 percent in 2020 but has consistently risen to the current level. The average plant operating capacity also received support from export demand.

According to reports, Chinese PP producers reported an average capacity utilization of their existing PP-producing plants at 81 percent in 2020, which is substantially lower than the 87 percent reported in 2021 and the peak of around 92 percent posted in 2021. This indicates that Chinese producers adjusted their operating capacity based on the demand for PP products.

Six years ago, in 2016, China’s PP production capacity was estimated at approximately 18 million tonnes per annum, with almost 100 percent capacity utilization, while the country’s demand was at 22 million tonnes. Since then, both PP production and consumption have increased significantly. China’s PP production rose to 30 million tonnes in 2022, and its consumption reached 33 million tonnes, with the country’s installed polypropylene capacity standing at approximately 37 million tonnes.

Reports indicate that Chinese producers installed approximately 1.3 million tonnes of additional PP production capacity in 2022. In the previous year, China’s total PP installed capacity was estimated at 31.7 million tonnes per annum (MTPA). Major Northeast Asian countries – China, Japan, South Korea, North Korea, and Russia, are likely to cumulatively account for around 51 percent, equivalent to 6.9 million tonnes per annum (MTPA), of the global capacity additions projected at 11 MTPA in 2023.

The Northeast Asian country’s massive expansion plans will be followed by 1.6 MTPA of fresh capacity to be added by manufacturers in Southeast Asia. Producers in the African countries are set to add 0.8 MTPA of new capacity in 2023, followed by North America 0.5 MTPA, and Europe 0.4 MTPA. Therefore, continuing fresh capacity additions will take the global PP manufacturing capacity to 114.8 MTPA in 2023, compared to 103.7 MTPA in the previous year.

The total PP production capacity in China was estimated at around 45 million tonnes, which accounts for nearly 44 percent of the global output capacity of 103.7 million tonnes in 2022. Therefore, China has established the production capacity to supply PP to the rest of the world to capture local markets in other countries and influence future market trends.

Outlook
China’s PP exports for the entire 2020 stood at 425,000 tonnes. However, the shipment outflows jumped almost four-fold to 1.6 million tonnes in 2023. If the current trend continues, China’s PP exports will rise further to 2.5 million tonnes in the calendar year 2024.


DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com