By Fu Xi, OilChem China

China’s polyolefin industry in the world

China’s capacity of polyolefin experiences continuous expansion in 2023, especially polypropylene (PP) capacity, which is predicted to soar 7.1 million t/a this year, with 2.65 million t/a having already entered the market in H1. At present, domestic PP capacity accounts for 38.31% of the global total, and in 2022, occupied 78.81% of the combined capacity of Northeast Asia, the world’s largest PP production region taking up 48.61% of the global total. In spite of a large scale, China’s PP industry is not strong: PP made by domestic producers is mainly used in middle and low-end markets. China’s polyethylene (PE) capacity – currently in a period of rapid capacity expansion – ranks first in the world, but makes up just 19.87% of the global total. Domestic demand for PE is highly dependent on imports, with the degree of dependency reaching 40%.

China’s polyolefin market

In 2022, PE demand gap concentrated in three major PE consumption regions: North China, East China and South China (see Figure 1 for details). In addition to expanding capacity, importing PE will be a main approach to cover domestic PE demand gap, versus PP oversupply arising from continuous capacity expansion, especially in eastern coastal areas (see Figure 2 for details). Enterprises raising PP capacity in recent years include Zhejiang Petroleum & Chemical Co., Ltd. and Oriental Energy Co., Ltd. in East China; Grand Resource Co., Ltd. and Fujian Zhongjing Petrochemical Co., Ltd. in South China; Chambroad Polyolefin New Material Co., Ltd. and Wanhua Chemical Group Co., Ltd. in North China. As for raw materials, petroleum was the most important resource for both PE and PP in 2022, holding a higher capacity proportion in PE industry than in PP industry (see Figure 3 and Figure 4 for details).

Figure 1 China’s regional PE supply and demand in 2022

Figure 2 China’s regional PP capacity distribution from 2022 to 2030

Figure 3 Proportions of raw materials in China’s PE capacity in 2022 and forecast      in 2027

Figure 4 Proportions of raw materials in China’s PP capacity in 2022

Import and export

China imported 13.47 million tons of PE in 2022, down 7.69% YoY. More specifically, import volume of HDPE and LLDPE fell more sharply, falling 10.52% YoY and 7.91% YoY, respectively. The degrees of dependence on import reached 35.7% in the area of HDPE and 28.8% in the area of LLDPE, both far lower than 52.33% in the area of LDPE (see Figure 5 for details). The number of domestic LDPE units was small, curbed by related technologies.

Figure 5 Degrees of dependence on imported PE from 2018 to 2022

Exporting PP will be an effective way to deal with domestic oversupply. In 2022, PP was mainly exported to Southeast Asian countries, and 24.63% of exported PP was absorbed by Vietnam, India and Bangladesh (see Figure 6 for details).

Figure 6 Main export destinations of China’s PP in 2022

Prospects of China’s polyolefin industry

Expected to maintain an upward momentum from 2023 to 2027, China’s PP capacity may skyrocket in 2024, but after 2025, capacity expansion is forecast to slow down, given postponement to put new projects into production, project shutdown, etc. New PP capacity will be concentrated in North China (especially in Shandong), East China (Zhejiang) and South China (Guangdong). See Figure 7 for details.

Figure 7 China’s regional PP supply forecast in 2027

With new PP projects coming on stream, compound annual growth rate of PP supply will reach 6.01% and that of apparent consumption 5.53%, both from 2023 to 2027, exerting greater pressure on product prices. See Figure 8 for details.

Figure 8 China’s capacity increment forecast of main PP downstream industries

Import proportion of PE special materials will increase from 20% to 26% during 2023-2027, with major products including UHMWPE, metallocene polyethylene, etc. For PP firms, potential products will be high-end special materials, e.g. high melt strength polypropylene, foamed polypropylene, etc.

Suggestions

Domestic polyolefin enterprises are wise to: 1) actively research high-end products (e.g. metallocene polyolefin and high melt strength polypropylene); 2) build high-end brands (involving copolymerized films, UHMWPE, etc.); 3) expand overseas markets and diversify export products; 4) take advantages of combining futures and spot markets.