2014 PE Market in China – Analysis and Forecast

By Chang Min, China National Chemical Economic and Technical Development Centre

Polyethylene (PE) is a synthetic resin with extensive applications. The principal types are low density polyethylene (LDPE), high density polyethylene (HDPE) and linear low density polyethylene (LLDPE). It is used mainly to produce films for agricultural use, food packaging and industrial packaging, and to make cladding/coating materials for electric wires/cables.

1. Supply

China’s PE capacity grew by 2.1 million t/a in 2014, an increase of 16.4%; 1.5 million t/a of that was coal-based, and 600 kt/a was oil-based. At the end of 2014, there were nearly 30 PE producers in China. Capacity was 14.9 million t/a, and output was 12.548 million tons, an increase of 11.7% over the previous year. Table 1 shows the major PE producers in China.
Most of the PE production units in China are operated by Sinopec and PetroChina. Sinopec’s capacity is 7.055 million t/a, 47.3% of the national total. PetroChina’s is 4.999 million t/a, 33.5%. The two biggest PE producers in China today are Daqing Petrochemical Co., Ltd. and Dushanzi Petrochemical Co., Ltd., both subordinate to PetroChina, with respective capacities of 1.125 million t/a and 1.100 million t/a, 7.6% and 7.4% of the national total. Figure 1 shows the composition of PE capacity in China in 2014 by enterprise.
China’s PE capacity has increased constantly in recent years, from only 5.88 million t/a in 2005 to 14.90 million t/a in 2014, with average annual growth of 10.9%. Output increased from 5.03 million tons in 2005 to 12.548 million tons in 2014, averaging 10.7% annually. The main units constructed or expanded in the last two years include the 300 kt/a LLDPE unit and the 300 kt/a HDPE unit of Sinopec-SK (Wuhan) Petrochemical Co., Ltd., the 300 kt/a LLDPE unit and the 300 kt/a HDPE unit of PetroChina Sichuan Petrochemical Co., Ltd., the 300 kt/a LLDPE unit and the 300 kt/a HDPE unit of Yanchang Coal Yulin Energy & Chemical Co., Ltd., the 300 kt/a LLDPE unit of ChinaCoal Shaanxi Yulin Energy and Chemical Co., Ltd., the 300 kt/a LLDPE unit of Ningxia Baofeng Clean Energy Co., Ltd. and the 300 kt/a LLDPE unit of Pucheng Clean Energy Co., Ltd. The PE units of Sinopec-SK (Wuhan) Petrochemical Co., Ltd. started production in 2013. Other PE units were all completed and put on stream in 2014. Figure 2 shows the capacity and output of PE in China in recent years.
China’s capacity cannot meet domestic demand. Quite a few new PE units will be constructed in China in the next few years. Four PE units, with a total capacity of 1.15 million t/a, are planned to start production in 2015. The major raw material of these units is coal. Except for the PE unit in Zhejiang Xingxing New Energy Technology Co., Ltd., whose time for starting production is yet uncertain, the units will be put on stream in the second half of 2015. Six PE units with a total capacity of 2.30 million t/a will start production in 2016. Except for the PE unit in Zhongke Refinery & Petrochemical Co., Ltd., which will be based on oil, all the units will use coal as the major raw material. If these units all start production on schedule, the national capacity will reach 18.35 million t/a in 2016. Table 2 shows the PE construction and expansion projects in the next few years.

2. Demand

Pushed by the development of packaging, injection-molded products and electric wires/cables, the consumption of PE increased constantly during 2009-2014, bringing apparent consumption of PE to 21.407 million tons in 2014. The average annual growth of consumption was 7.4% in the past 5 years. Table 3 shows the details.
HDPE manufacture is the biggest source of PE demand here. China consumed 9.47 million tons of HDPE in 2014, accounting for around 44.3% of the total. The demand for LLDPE is slightly lower than that for HDPE. The consumption of LLDPE was 7.885 million tons in 2014, accounting for around 36.8% of PE consumption. Demand for LDPE is the weakest of the three. Only 4.052 million tons of LDPE was consumed in 2014, accounting for only 18.9% of PE consumption.

Table 1    Major PE producers in China, 2014

Producer    Product and capacity (kt/a)
    LDPE    LLDPE    HDPE
Sinopec Beijing Yanshan Petrochemical Co., Ltd.    320        160
Sinopec Shanghai Petrochemical Co., Ltd.    200        395
Sinopec Maoming Petrochemical Co., Ltd.    360    220    350
BASF-YPC Co., Ltd.    200        
Sinopec Qilu Petrochemical Co., Ltd.    140    120    390
PetroChina Lanzhou Petrochemical Co., Ltd.    200    360    170
PetroChina Daqing Petrochemical Co., Ltd.    260    375    490
CNOOC and Shell Petrochemicals Co., Ltd.    264        260
Fujian Refining & Petrochemical Co., Ltd.        450    450
Shanghai SECCO Petrochemical Co., Ltd.        300    300
Sinopec Yangzi Petrochemical Co., Ltd.        200    270
Sinopec Zhongyuan Petrochemical Co., Ltd.        260    
Sinopec Guangzhou Petrochemical Co., Ltd.        200    
Sinopec Tianjin Petrochemical Co., Ltd.        120    
Sinopec Zhenhai Refining & Chemical Co., Ltd.        450    
Sinopec SABIC Tianjin Petrochemical Co., Ltd.        300    300
Sinopec-SK (Wuhan) Petrochemical Co., Ltd.        300    300
PetroChina Dushanzi Petrochemical Co., Ltd.        400    700
PetroChina Jilin Petrochemical Co., Ltd.        274    300
PetroChina Fushun Petrochemical Co., Ltd.        450    350
(full density)
PetroChina Sichuan Petrochemical Co., Ltd.        300    300
Shenhua Baotou Coal Chemical Co., Ltd.        300    
Liaoning Huajin Chemical (Group) Co., Ltd.        125    300
Shenyang Paraffin-Wax Chemical Co., Ltd.        100    
Yanchang Coal Yulin Energy & Chemical Co., Ltd.        300    300
ChinaCoal Shaanxi Yulin Energy and Chemical Co., Ltd.        300    
Ningxia Baofeng Clean Energy Co., Ltd.        300    
Pucheng Clean Energy Co., Ltd.        300    
PetroChina Liaoyang Petrochemical Co., Ltd.            70
Subtotal    1 944    6 804    6 155
Total of PE    14 903


China hosted 6.16 million t/a of HDPE capacity in 2014. The demand for HDPE comes mainly from the makers of hollow blow-molded products, films, pipes, injection-molded products and electric cable materials. Hollow blow-molded products and films are major products, constituting a considerable proportion of consumption. Most of China’s HDPE is imported. In 2014, 4.596 million tons was imported, 48.5% of domestic consumption. The main import sources include Iran, Korea and Saudi Arabia. The major types imported include 7000F, EX5 and 5110 from Iran, 5502BN and F00952 from Saudi Arabia, 7000F and 5000S from Thailand and Korea.
China hosted 6.804 million t/a of LLDPE capacity in 2014. Film manufacture is the major driver of LLDPE demand; around 84.0% of the LLDPE consumed in 2014 went into making films. The LLDPE consumed in making rolling-molded and other products accounted for around 13%. The import volume of LLDPE was 2.458 million tons in 2014, around 31.2% of domestic consumption. Import sources for film-grade LLDPE mainly include Saudi Arabia and Singapore. The major types imported include 218W and 118W from Saudi Arabia, 1002KW from Singapore, 0209AA from Iran, 7420D and 7420D1 from Thailand.

Table 2    New PE capacity in China

Company    Capacity (kt/a)    Startup date    Raw
material
Shaanxi Shenhua Shenmu Co., Ltd.    300    September, 2015    Coal
ChinaCoal Mengda New Energy & Chemical Co., Ltd.    300    October, 2015    Coal
Jiutai Energy Inner Mongolia Co., Ltd.    250    Wet commissioning at the end of 2015    Coal
Zhejiang Xingxing New Energy Technology Co., Ltd.    300    2015    Coal
Zhong’an United Coal Chemical Co., Ltd.     350    Intermediate handover in January 2016    Coal
Zhongke Refinery & Petrochemical Co., Ltd.     600    Completion at the end of 2015, startup in 2016    Oil
Qinghai Damei Coal Industry Co., Ltd.    300    2016    Coal
Shenhua Ningxia Coal Industry Company     450    Completion and intermediate handover in June 2016    Coal
Shenhua (Baotou) Charcoal Chemical Industry Co., Ltd., second-phase project    300    June 2016    Coal
Shenhua Xinjiang Energy Co., Ltd., second-phase project    300    August 2016    Coal
Total    3 450        

Table 3    Consumption of PE in China, 2005-2014
Year    Output (kt)    Import volume (kt)    Export volume
(kt)    Apparent consumption (kt)    Self-sufficiency (%)
2005    5 034    5 259    58    10 235    49.2
2006    6 172    4 891    39    11 024    56.0
2007    7 192    4 534    61    11 665    61.7
2008    7 169    4 497    67    11 599    61.8
2009    7 610    7 409    62    14 957    50.9
2010    9 140    7 450    176    16 414    55.7
2011    9 670    7 410    320    16 760    57.7
2012    10 480    7 888    288    18 080    58.0
2013    11 229    8 815    203    19 841    56.6
2014    12 548    9 108    249    21 407    58.6



China hosted 1.944 million t/a of LDPE capacity in 2014. Films are major products driving the demand for LDPE. Electric cable materials and cladding/coating materials are also important. The import volume of LDPE was 2.054 million tons in 2014, around 50.7% of domestic consumption.
With the stable growth of China’s economy, the development of the packaging sector, agriculture industry, the automobile sector and the electronic sector will promote a stable increase in the demand for PE, which is expected to reach 23.20 million tons in 2016.

3. Import and export

China imported 9.108 million tons of PE in 2014, an increase of 3.3% over the previous year, and exported 249 kt, an increase of 22.7%. The main reason for the remarkable increase of exports is that quite a few new units started production in 2014, while the development of downstream enterprises was slow. There is still a possibility for a further increase of exports in 2015. It is expected that China’s import of PE will remain considerable in the next few years. Table 4 shows the details.

4. Market price

Demand for PE fell off in the first quarter of 2014, and prices of various varieties were as low as they have been seen in recent years. With a recovery of demand and a reduction of imported resources, prices started to increase slowly in the second quarter. Due to sustained slackness of demand, prices of various PE varieties entered a stage of narrow consolidation in the third quarter. The constant slide of international crude oil and ethylene prices in the fourth quarter motivated drastic price reductions for PE. Prices of all varieties, including HDPE, LLDPE and LDPE, dropped sharply. In all PE varieties, the prices of some subtypes dropped to below RMB10 000/t. Figure 3 shows the details.
As the production cost and the profit of coal-based PE have evident advantages over oil-based PE, the completion of a great deal of coal-based PE capacity will surely increase the supply of low-price resources in the market and bring down prices throughout the PE market.