Long-lasting Market Gap of Propylene    
By Zhou Chunyan    

PP leading the consumption direction of propylene

In China, around 74.8% of all propylene is used to produce PP (polypropylene). The balance is used to produce products such as acrylonitrile and propylene oxide. For a considerable period of time in the future, PP production will consume an even greater proportion. To meet the needs of acrylic fiber and ABS resin production, China will continue to expand its acrylonitrile capacity, and acrylonitrile production will consume a high proportion of the nation's propylene.

High concentration of domestic production

The total capacity of propylene in China was 10.496 million t/a in 2008. Sinopec Corp. and PetroChina hold major shares. The 400 000 t/a propylene project of CNOOC and Shell Petrochemicals Co., Ltd., a joint venture project of CNOOC and Shell, already started production in 2006. In addition, some small refining enterprises in ChemChina and Sinochem International and some small private refining enterprises produce propylene. The total propylene capacity of these small enterprises is only several hundred thousand tons a year. Due to restrictions from refining policies of the state and impacts from international crude oil prices, both the output and the operating rate in small and medium refining enterprises are quite low. Propylene producers usually have matched downstream units and the commodity amount is very small.
    Propylene production in China can be classified by source into two categories. One source is cracked propylene from ethylene cracking units. The other is refinery propylene from FCC (fluid catalytic cracking) refinery gas. With the rapid development of the petroleum and chemical industry, China's propylene capacity expanded considerably in the 1990s. Owing to the completion of large ethylene units and the renovation of existing ethylene units, the propylene co-production capacity in ethylene units has grown. At the same time the output of propylene in refineries has also increased. China's propylene output was around 10.0 million tons in 2008. The capacity of propylene co-produced through ethylene cracking accounts for around 46.7% of the total.
   Propylene production in China is highly monopolized. Also, there are rich varieties of downstream products in Sinopec Corp. and PetroChina, so amounts that reach the open market as a commodity are extremely small. As a result, propylene needed in many downstream enterprises has to be imported from abroad. The amount of propylene imported to China reached 917 000 tons in 2008, an increase of 25.6% over 2007. In appearance, imported propylene accounts for only around 8.5% of domestic consumption and the domestic propylene market basically has supply/demand balance. In fact, however, the propylene supply in China has a huge gap. In addition to small amounts of propylene monomers, great quantities of downstream derivatives such as PP, acrylonitrile and propylene oxide are also imported. If the volume of these downstream products that is imported is included in an estimate of the real demand for propylene, the propylene equivalent supply gap in the domestic market is more than 4.0 million tons.
   Several large ethylene units will be added in China in the next few years. The capacity of refineries will also be expanded further. The output of propylene will therefore be remarkably increased. As great quantities of propylene derivatives will still be imported to China, the supply gap of propylene will remain quite big.