By Chen Huimin, China National Chemical Information Center

China’s propylene market overview

China’s propylene market grew rapidly during 2012-2022, as shown in Figure 1. In 2022, the domestic propylene capacity exceeded 56 million t/a, and the consumption exceeded 48 million tons. As for import and export, China's net import volume of propylene has been decreasing in recent years. Accordingly, the net import dependency was less than 5% in 2022. In the longer term, with the continuous expansion of domestic propylene capacity, the import volume is expected to decrease further.

Figure 1 China’s propylene supply and demand, 2012-2022

At present, the main propylene production processes in China consist of refinery by-product propylene’s catalytic cracking (FCC), naphtha steam cracking, propane dehydrogenation (PDH), and methanol to olefins or coal to olefins (MTO/MTP, CTO/CTP). In 2022, domestic propylene capacity marked a year-on-year increase of 6.11 million t/a or 12%, with PDH to propylene process being dominant and steam cracking process ranking the second, as shown in Figure 2. As of 2022, the propylene capacity based on PDH surpassed that based on catalytic cracking and coal (methanol) to olefins, becoming the second biggest process after steam cracking. It is expected that domestic propylene capacity will continue to expand during the 14th Five-year Plan period (2021-2025) under the route of developing lightweight grades. At the same time, the industrial chain will continue to develop towards bigger scale and more integration. 

Figure 2 Distribution of China's propylene process routes in 2022

Status quo and development trend of China's PDH-to-propylene industry

China's PDH-to-propylene capacity has grown rapidly in recent years. In 2022, the total domestic PDH-to-propylene capacity hit 13.45 million t/a, accounting for 24% of the total domestic propylene capacity.

China's PDH-to-propylene process has been developing fast in recent years, with the capacity reaching 13.45 million t/a in 2022, accounting for 24% of the total domestic propylene capacity, as shown in Figure 3. The start-up of seven PDH-to-propylene units including Qixiang Tengda, Sierbang, Zibo Xintai, Liaoning Jinfa and the other three units, with increased capacity of 3.15 million t/a, contributed to the half of the propylene capacity increments during the year. Table 1 shows the details.

Figure 3 China's PDH-to-propylene capacity, 2012-2022

There are more than 35 million t/a PDH-to-propylene capacities in construction and to be constructed, and with the massive release of them, China's PDH-to-propylene industry will face dual risks related to raw material supply and sales of products.

According to statistics of projects under construction and to be constructed projects, there are 14 PDH-to-propylene projects planned to be put into production in 2023, with new capacity of approximately 8.7 million t/a (as shown in Table 2). Additionally, there are more than 27 million t/a PDH-to-propylene in planning, so the total capacity under construction, to be constructed and in planning will hit over 35 million t/a. Assuming that all of the projects planned to be put into production in 2023 can be constructed and started up by 2025, and 30% of the other capacity in planning can be completed and put into production by 2030, China's PDH-to-propylene capacity will reach 22 million t/a in 2025, and it will exceed 30 million t/a in 2030. At that time, the proportion of PDH-to-propylene capacity in the total domestic propylene supply will increase from 24% today to nearly 40%. Such big capacity ramp-ups will impose heavy pressure on the domestic propylene and derivatives markets, and the industry will face a round of structural adjustment.

Status quo and development trend of China's propane industry

China's propane consumption heavily relies on imports, and with the consecutive start-ups of domestic PDH-to-propylene capacity, the demand gap for feedstock propane will be bigger to be filled.  

A large number of PDH-to-propylene projects in China have been put into production since 2013, resulting in increasing consumption of feedstock propane. In 2022, the consumption of propane from PDH-to-propylene route took up 64% of the total propane imports. Although the domestic propane production is rising, the quality cannot meet the requirements for PDH-to-propylene process, so China’s propane market remains highly dependent on imports.

At present, the supply of propane in China mainly relies on cargoes imported from the United States and the Middle East, accounting for over 85% of the total availability. The United States has become the largest source of propane imports to China in recent years, and the import volume from the US has taken up 40% since 2021. Figure 4 and Figure 5 show the details.

Figure 4 Relation between imported propane and PDH-to-propylene from 2012 to 2022

Figure 5 Propane import origins, 2012-2022

With many new and planned PDH-to-propylene projects in China, the demand gap for feedstock propane will be bigger. Based on the aforementioned capacity assumptions, it is expected that the demand for propane in China will reach 21 million tons by 2025 (calculated based on the operating rates of 80%), an increase of 8 million tons compared to 2022.

In general, against the backdrop of a large number of domestic PDH-to-propylene projects coming on stream, the new propane trade volume in the world is largely unlikely to be enough to support the surging PDH-to-propylene capacity in China, which will raise the risk of importing propane further. In the short term, the global propane trade increments will not be adequate to support the growth of demand for propane from PDH-to-propylene producers in China. Therefore, when the growth rate of international propane supply is lower than that of downstream demand theoretically, propane prices may increase significantly.

To sum up, China's propylene industry chain is bound to see a new round of structural adjustment. The competition in the industry will gradually shift from products to the whole industry chain, which means that the industry will continue to develop towards bigger scale and more integration.