China slowly capturing the world polypropylene market with competitive price offers

China has started capturing the global polypropylene market slowly and steadily with competitive price offers, integrating its high inventory into major consumer countries. Gradually, Chinese polypropylene producers have explored new markets in Europe and Americas to boost their shipments. Asia and South East Asia have been their perennial customers, with exports to these Asian markets increasing manifold in recent years.

Continuous capacity expansion has led to higher polypropylene production in China, which needs to be consumed somewhere. The domestic market continues to face challenges in terms of increased consumption due to lower-than-expected growth in the country’s gross domestic product (GDP) in the April-June 2024 quarter, with expectations for this downward sentiment to continue into the calendar years 2024 and 2024. Consequently, the consumption of manufactured products remained subdued with weak consumer sentiment. The ongoing real estate crisis, coupled with lower domestic consumption, prompted Chinese producers to seek alternative markets and expand their business in existing ones.

Exports quadruple in 2023
The expanding footprints in global markets is evident from the fact that China, the world’s second-biggest economy, exported 1.6 million tonnes of polypropylene in the calendar year 2023, nearly four times the volume shipped in the previous calendar year. In the calendar year 2022, China recorded a total volume of polypropylene exports at 425,000 tonnes. The country was the world’s fifth largest exporter of polypropylene, earning US$1.73 billion from exports in the calendar year 2022. The present polypropylene price differential works out to 10-20 percent between China and the rest of the world, depending on proximity.

Expectedly, China’s polypropylene exports growth momentum is expected to continue with a potential of reaching 2.5-2.6 million tonnes in the calendar year 2024. As of May 2024, China’s polypropylene exports to Southeast Asia had already increased significantly compared to the same period in the previous calendar year. For example, exports to Vietnam increased from 82,024 tonnes in the January-May 2024 period to 182,799 tonnes in the corresponding period of the calendar year 2024.

In the calendar year 2020, China’s polypropylene exports for the whole year were just 424,746 tonnes. Between the calendar years of 2021 and 2023, the country’s exports ranged between 1.3-1.4 million tonnes. If the January-May 2024 period export momentum continues for the rest of this year, full calendar year 2024 exports figures would reach 2.6 million tonnes, double that of last calendar year.

Continuous capacity expansions
Continuous expansion in China’s polypropylene 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.

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. China’s polypropylene production capacity has increased significantly over the past five years, reaching 47 million tonnes per annum. The expanded capacity allows China to supply polypropylene to other countries, capture local markets, and influence future market trends.

A total of 84 planned and announced new projects are scheduled to commence commercial production with a cumulative capacity of 42.95 MTPA till December 2027. Existing projects in the Southeast Asian 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.

Leading producers under expansion drive
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 plans 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.

Improving self-sufficiency
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.

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