By Tan Jie, Sinopec Maoming PC
High-density polyethylene (HDPE) is widely used in packaging, agriculture, communications, construction and electronics, and its development prospects are optimistic. At present, HDPE is mainly produced via slurry or gas phase processes, like Dow's Unipol gas phase process, Ineos's Innovene slurry loop pipe process, Lyondell Basell’s Hostalen reactor slurry method and Chevron-Phillips slurry loop route.
Capacity rises steadily
In 2019, China's HDPE capacity was 7.92 million t/a. With the completion of Hengli Petrochemical (Dalian)’s 400 kt/a unit and Zhejiang Petrochemical’s 300 kt/a line (Phase I), China’s HDPE capacity reaches around 8.62 million t/a in 2020 (as of the end of May, the same below). The situation of major HDPE manufacturers in 2020 is shown in Table 1.
With the commissioning of newly built facilities, China’s HDPE capacity distribution pattern has undergone major changes. Northwest China (including Gansu Province, Ningxia Hui Autonomous Region, Xinjiang Uygur Autonomous Region, and Shaanxi Province) has become the largest HDEP production area, with a capacity of 2.35 million t/a in 2020, accounting for 27.26% of China’s total. It is followed by Northeast China (including Heilongjiang Province, Jilin Province and Liaoning Province), with a capacity of 2.075 million t/a, accounting for 24.07% of the total.
As for the sources of ethylene, 7.27 million t/a HDPE capacities will use the petroleum ethylene in 2020, accounting for 84.34% of China’s total; and 1.35 million t/a capacities will use coal-based ethylene, 15.66% of the national total. The HDPE production plants in Shaanxi and Ningxia mainly use coal-based ethylene as raw materials for production.
Short in supply and dependent on imports
In 2019, China's HDPE imports amounted to 7 997 900 tons, a YoY increase of 18.85%. The export volume was 164 800 tons, a YoY increase of 26.77%. China's HDPE imports mainly come from Saudi Arabia, Iran, the United Arab Emirates, South Korea, and India. In 2019, the total import volume from these 5 countries or regions reached 5 738 300 tons, taking 71.75% of total imports, a YoY growth of 33.34%. Saudi Arabia is the largest origin of imports, from which the import volume was 2 095 600 tons in 2019, accounting for 26.20% of the total, an increase of 41.77% year-on-year.
The shipments are coming into China mainly through Guangdong, Zhejiang, Shanghai, and Shandong. In 2019, the total imports via these four areas reached 5 716 500 tons, accounting for 71.48% of total imports, an increase of 20.09% year-on-year.
Apparent consumption increases stably
The apparent consumption of HDPE in China has grown steadily. In 2013, China's apparent consumption of HDPE was 9 326 000 tons, which increased to 10 871 500 tons in 2016, a growth of 0.09%; and it further increased to 15 478 100 tons in 2019, a year-on-year increase of 12.48%. The self-sufficiency rate was 50.40% in 2013, 52.97% in 2016, and 49.39% in 2019. Chart 1 shows the supply and demand of HDPE in China from 2013 to 2019.
Chart 1 China’s HDPE supply-demand, 2013-2019
China’s HDPE products are mainly used in films and sheets, injection molded products, blow molded products, and pipes. The consumption structure in 2019 was as follows: films and sheets accounted for 27.8%, injection molded products 23.4%, pipes and doors & windows profiles 16.6%, blow molded products 16.5%, fibers 5.3%, yarns about 5.9%, and others 4.5%.
East China, South China and North China are three major HDPE consuming areas in China, accounting for 72% of the total domestic consumption. Among them, East China is the largest consumer, taking 28% of the total, South China 24%, and North China 20%.
With the acceleration of urbanization, the strengthening of supporting infrastructure construction, the increase in demand for packaging products and home appliances, and the gradual implementation of tap water and natural gas renovation projects in old communities, China’s demand for HDPE will steadily increase. The demand in 2024 will reach 19.5 million tons, and HDPE pipes will be the field with the best development prospects.
The prices are going down
In recent years, due to the continuous growth of domestic supply and the decline of ethylene prices and import prices, the overall market prices of HDPE in China have shown a trend of continuous decline. In 2019, the market prices dropped significantly to RMB8 923/t averagely, with the high-end at RMB9 780/t in January and the low-end at RMB8 050/t in December. In 2020, market prices continue to fall. The prices were RMB7 800/t in January and dropped to RMB7 100/t in April. It is expected that, due to the decline in crude oil prices and the impact of corona virus pandemic, the market prices will continue to decline in a narrow range.
As China’s HDPE capacity and output cannot meet actual demand, there are still many producers planning to build or expand capacities in the future, including SINOPEC-SK (WUHAN) PC’s 300 kt/a, Lianyungang Petrochemical’s 400 kt/a, Zhongke Refinery’s 350 kt/a, Wanhua Group’s 350 kt/a, Shandong Jinhai Chemical’s 400 kt/a, Liaoning Baolai Chemical’s 300 kt/a, Daqing Lianyi’s 400 kt/a, Sinochem Quanzhou Petrochemical’s 400 kt/a, and Xinjiang Tarim Ethane to Ethylene Project’s 300 kt/a. In addition, Tianjin Bohua Chemical and Guangdong Petrochemical are also planning to build HDPE production facilities. It is estimated that by 2024, China's HDPE capacity will exceed 12 million t/a.
From the perspective of regional distribution, the new projects are mainly located in the Northeast China, East China and South China and the proportion of Northwest China will decline by then. As for the sources of raw materials, Lianyungang Petrochemical , Xinjiang Tarim Ethane to Ethylene Project, Yantai Wanhua and Shandong Jinhai Chemical will adopt a new light hydrocarbon to olefin process (ethane dehydrogenation to ethylene); Zhejiang Petrochemical, Hengli Petrochemical, Zhongke Refining and Chemical, Sinochem Quanzhou, Liaoning Baolai Petrochemical, SINOPEC-SK (WUHAN) PC (capacity expansion) and Guangdong Petrochemical will use traditional naphtha-to-olefin routes. HDPE from traditional naphtha ethylene will still dominate the market.
Although China's HDPE capacity continues to increase, the contradiction between supply and demand is still prominent. On one hand, there is a surplus of low-end general-purpose products, and on the other hand, some high-end products will still be import dependent. The Middle East will continue to be the main source of imports on the heel of low cost there. In the future, the competition among general HDPE products will further intensify, and the market price competition will become more intense. The HDPE industry should continue to improve the technical level, optimize process technology, improve product quality, vigorously adjust the product structure, and actively develop high-performance, high-value-added products to meet the actual needs and reduce the dependence on imports.