China Faces Ongoing Propylene Shortage


Global propylene supply

In 2010, the world had enough production capacity to make around 98 million t/a of propylene, and 77 million tons was actually made - an overall capacity utilization rate of 78.2%. Asia, North America and Western Europe remain the world's major propylene producing regions. In order to meet brisk market demand, global propylene producers are trying to increase their capacity and output. Experts say that global capacity will continue growing rapidly in the next five years, reaching 115 million t/a by 2015.

Supply in China

In China, most propylene is made in two ways: ethylene crackers and refineries. With the establishment of large-scale ethylene plants and the transformation of existing ethylene plants in China, the propylene capacity of those plants has increased significantly. At the same time, the propylene output of refineries here is also gradually rising.
In 2010, China's propylene production capacity was 15 million t/a. Forty eight percent of that was steam crackers in ethylene plants, and the rest was FCC units in refineries. The country's actual output was about 13.24 million tons. At the end of 2011, China's total propylene capacity had reached 15.27 million t/a.
China's propylene capacity is mainly controlled by two giants: Sinopec Group and CNPC. In addition, CNOOC, China Chemical Industry Group, Sinochem Group and some local and private refineries also have some propylene capacity. Due to the restrictions of national refining policies and the impact of international oil prices, the operating rates of these smaller companies are very low. Most propylene manufacturers in China have constructed their own downstream production facilities, using up most of propylene they produce, so little is sold on the open market.

China major propylene producers
Producer    Capacity in 2011 (thousand t/a)
Sinopec Zhenhai Refining & Chemical Co Ltd    850
Shanghai SECCO Petrochemical Co Ltd    700
PetroChina Dushanzi Petrochemical Co    606
PetroChina Lanzhou Petrochemical Co    553
Shenhua Ningxia Coal Industry Co    520
Sinopec Fujian Refining and Chemical Co Ltd     507
Sinopec Maoming Petrochemical Co    500
Sinopec/SABIC Tianjin Petrochemical Co Ltd    500
CNOOC and Shell Petrochemical Co Ltd    500
Sinopec Qilu Petrochemical Co    475
China Datang Group Duolun Co    460
Sinopec Shanghai Petrochemical Co    459
Sinopec Yanshan Petrochemical Co    456
Sinopec Yangzi Petrochemical Co (YPC)    416
PetroChina Jilin Petrochemical Co    415
PetroChina Daqing Petrochemical Co    335
Sinopec Jingmen Petrochemical Co    322
Liaoning Huajing Chemical Industry Co    310
Shenhua Group Chemical Co    300
BASF-YPC Co Ltd    300
Shaanxi Yanchang Refinery    250
PetroChina Daqing Refining and Chemical Co Ltd    300
Sinopec Jinling Petrochemical Co    256
Sinopec Luoyang Petrochemical Co    230
PetroChina Dalian Petrochemical Co    200

Over the next few years, China will undertake several projects for new and expanded propylene capacity, pushing the total to about 22 million t/a by 2015.
China's propylene production today cannot keep up with domestic market demand. In 2011, the country imported 1.755 million tons, 15.2% more than the previous year. Every year, China imports a certain amount of propylene monomer and large quantities of polypropylene (PP), acetone, acrylonitrile, butanol/octanol, propylene oxide and other propylene derivatives. Taking the import volume of these downstream products as a component of the domestic demand for propylene, the 2010 gap between domestic demand and domestic supply can be seen to have exceeded 8 million tons. In 2010, 32.6% of China's imported propylene monomer came from Korea, 29.9% from Taiwan, and 22.8% from Japan.
   In the next few years, although many new and expanded propylene units will be put into production in China, the shortfall of propylene production will not be overcome. On the contrary, the country's import of propylene is expected to continue increasing in the coming years.

Propylene consumption in China

In 2010, the apparent consumption of propylene in China was 14.76 million tons, 10.2% more than in 2009. In 2011, it is estimated to have reached 16 million tons, up about 9% year on year (yoy).

Propylene supply and demand in China in 2001-2011 (thousand tons)
Year    Output    Import volume    Export volume    Apparent consumption
2001    4779    271    2    5048
2002    5320    297    negligible    5617
2003    5932    226    negligible    6158
2004    6519    213    negligible    6412
2005    8180    189    9    8360
2006    9150    321    2    9469
2007    10451    728    negligible    11179
2008    10496    917    negligible    11413
2009    11347    1548    negligible    12895
2010    13242    1524    negligible    14766
2011    14200 E*    1755    1.5    15954
(E* - estimated values)

The manufacture of PP accounts for about 75% of China's propylene consumption, and the remaining 25% is used in making acetone, butanol/octanol, acrylonitrile, propylene oxide, acrylic acid and other chemicals.
In the next few years, PP will continue to be the principal derivative of propylene, and its share of total consumption will rise further. In order to support the production of acrylic fiber and ABS resin, China will continue to expand its acrylonitrile production capacity. So acrylonitrile makers will continue to consume the lion's share of propylene.
   From 2010 to 2015, China's demand for propylene is expected to grow at an average annual rate of 10.3%. PP will account for 80% of the demand. Both the manufacture of propylene oxide and the consequent demand for propylene will grow rapidly, with the market growing faster for propylene oxide than for other propylene derivative.
   By 2015, China's demand for propylene will reach 22 million tons a year, and the country will still be importing a large volume of propylene derivatives each year. Considering equivalent demand, the imbalance between supply and demand will still be prominent in China, and the shortage of domestic propylene will still be serious.

Price movement in 2011

In the first nine months of 2011, with rising raw material prices and rebounding market demand, the price of propylene climbed slowly from RMB10 425 /t at the beginning of the year to RMB11 883 /t in September. Later, affected by sluggish market demand, the price began to fall. In December, it dropped to RMB9807 /t, down 19.0% compared with the October 9 level. Because of very weak demand in the domestic PP sector coupled with the earlier-than-usual onset of Spring Festival this year, small woven bag factories tended to stop production in January, keeping the domestic propylene market sluggish.
   At present, China's propylene capacity is basically held in the hands of Sinopec and PetroChina. The propylene produced by the two giants is almost supplied to their own supporting facilities to produce PP, acetone, butanol/octanol, acrylonitrile, propylene oxide, acrylic acid, EPDM and other chemicals, and very little is for sales. With the rapid development of downstream products of propylene, the contradictory between propylene supply and demand in China is growing. Although many new and expanded propylene projects will be built in China, the shortage of propylene in the country will remain for a long time in the future.