Review and Prospect of China’s Synthetic Resin Industry

By Qu Yansong, Sinopec Group

Demand growth of China’s synthetic resin plummeted in 2012, and synthetic resin enterprises, especially those engaged in polyolefin business, suffered great losses. In the new development stage that will come soon, low cost will be a key factor for synthetic resin enterprises to defeat rivals.
Coal-to-polyolefin capacity is expected to exceed 3 million t/a in China in 2013 upon completion of units constructed by Ningbo Skyford Chemical Co., Ltd., Shaanxi Yanchang Petroleum (Group) Co., Ltd. and Shaanxi Pucheng Clean Chemical Co., Ltd.

I China’s Synthetic Resin Industry in 2012

1. Production

By the end of 2012, domestic synthetic resin capacity exceeded 58 million t/a. The rapid growth was attributable to new ethylene units that were put into production by Daqing Petrochemical Company and Fushun Petrochemical Company, and to capacity expansion of polyvinyl chloride, polystyrene and ABS. However, as market downturn curbed demand, output growth decelerated in 2012, when the output was up 1.8% YOY to around 41.61 million tons – polyethylene, 10.43 million tons, down 2.1% YOY; polypropylene, 11.35 million tons, up 5.3% YOY; polyvinyl chloride, 13.18 million tons, up 0.5% YOY.
1) Polyethylene
By the end of 2012, China has more than 20 polyethylene producers, boasting annual capacity of 11.75 million t/a, increasing 1.35 million t/a from a year earlier. Of the total capacity, LDPE contributed 1.89 million t/a; HDPE, 4.70 million t/a; LLDPE, 5.16 million t/a.
   Polyethylene output in 2012 fell 2.1% YOY to 10.43 million tons, which was mainly produced by Sinopec (58.6% or 6.14 million tons) and PetroChina (29.2% or 3.07 million tons).
2) Polypropylene
By the end of last year, there were more than 90 polypropylene enterprises in China, and capacity was nearly 13.9 million t/a, gaining 1.35 million tons YOY.
   China produced 11.35 million tons of polypropylene in 2012, up 5.3% YOY. Sinopec and PetroChina are the two largest manufacturers, accounting for 48.9% (5.55 million tons) and 23.1% (2.63 million tons) respectively. But with other companies from home and abroad entering China’s polypropylene market, market shares current controlled by Sinopec and PetroChina will decline continually.
3) Polyvinyl Chloride
Domestic polyvinyl chloride enterprises exceeded 140 and their total capacity rose around 1.3 million t/a from 2011’s level to more than 22 million t/a at the end of 2012.
   Polyvinyl chloride output was up 0.5% YOY to 13.18 million tons in 2012. Central and western China saw rapidly growth in both capacity and output. And yield in Inner Mongolia, Xinjiang, Tianjin, Henan and Shandong exceeded 1 million tons. Sinopec and PetroChina just kept a 600 kt/a unit as they did not develop polyvinyl chloride business in recent years.
2. Import
The State imported 15.65 million tons of synthetic resin in 2012, up 1.4% YOY. The import was characterized by:
1) Polyolefin import was up but import of other varieties down.
China’s LDPE import grew 7.6% YOY to 1.57 million tons in 2012; HDPE import, up 13.7% YOY, 4.01 million tons; polypropylene import, rising 3.5% YOY, 3.91 million tons; LLDPE import, down 6.1% YOY, 2.31 million tons.
Import of other kinds of synthetic resin declined in 2012. For example, polystyrene import was 980 000 tons, down 5.6% YOY; polyvinyl chloride import, 1.21 million tons, losing 8.1% YOY; ABS resin import, 1.67 million tons, falling 10.1% YOY.
2) Polyethylene import was mainly from the Middle East and import of other kinds still from surrounding areas.
In recent years, China imported five major kinds of general resin mainly from the Asian-Pacific region, such as Korea, China Taiwan, Japan, Singapore, Thailand and Malaysia, and a part of imports was from the U.S., Saudi Arabia and Canada. In 2012, synthetic resin from surrounding countries/regions decreased, but products from the Middle East increased to 5.04 million tons, accounting for 32% of total import, achieving 4% YOY.
   In 2012, synthetic resin import from Korea and China Taiwan decreased by 73 000 tons and 182 000 tons respectively; import from Saudi Arabia increased 14.4% YOY, or 211 000 tons, to 2.25 million tons (polyethylene, 1.40 million tons; polypropylene, 843 000 tons); import from North America was 1.02 million tons, declining 153 000 tons YOY (polyethylene import, down 70 000 tons; polypropylene import, falling 60 000 tons); import from Iran gained 350 000 tons from a year earlier to 1.15 million tons.
   In terms of import sources, 63% of polyethylene import was from Saudi Arabia, Iran, Korea, Thailand and United Arab Emirates; 61.8% of polypropylene import from Korea, Saudi Arabia, China Taiwan and India; 63.3% of polyvinyl chloride import from China Taiwan and America; 74.8% of polystyrene import from Korea, China Taiwan and Hong Kong; 84.8% of ABS import from Korea and China Taiwan.
3) Guangdong province is the largest importer while its proportion is decreasing.
Guangdong, Zhejiang (importing 2.16 million tons), Shanghai, Shandong, Jiangsu, Fujian, Tianjin and Beijing imported most general resin in 2012. The import volume of Guangdong province was 5.80 million tons in 2012, down 1.6% YOY, accounting for 37.1% of the domestic total. The proportion of the second largest importer, Zhejiang province, increased from 11.9% in 2011 to 13.8% in 2012.
4) General trade proportion was down and processing trade ratio up.
China imported synthetic resin mainly in two patterns, general trade and processing trade. Imports in the former way increased 1.06 million tons YOY to 6.98 million tons in 2012, 44.6% of the total, up 6.1 percentage points from a year earlier; imports in the later mode decreased 178 000 tons YOY to 6.61 million tons in 2012, 42.2% of the total, down 1.8 percentage points YOY.
3. Consumption
Influenced by deceleration of global economic growth and transformation of China’s economy, China’s synthetic resin industry saw growth decrease in both consumption and import.
   China produced 57.82 million tons of plastic products in 2012, up 9.0% YOY (plastic wire and knitting products, 6.50 million tons, growing 8.2% YOY; plastic pipes, 7.32 million tons, increasing 10.4% YOY; plastic films, 9.70 million tons, achieving 9.3% YOY).
   Domestic apparent consumption of synthetic resin grow 1.9% YOY to around 55.99 million tons in 2012 – polyethylene apparent consumption, 18.03 million tons, rising 1.4% YOY; polypropylene, 15.09 million tons, up 5.1% YOY; polyvinyl chloride, 13.93 million tons, down 0.4% YOY.

II Prospect in 2013

1. Supply Forecast
Capacity of synthetic resin, especially polyolefin products, will soar in 2013 as many new units will be finished this year. For example, a 800 kt/a ethylene project of Sinopec Wuhan Petrochemical Co., Ltd. will be put into operation, adding 600 kt/a and 400 kt/a to capacity of polyethylene and polypropylene respectively; a 800 kt/a ethylene unit of PetroChina Sichuan Petrochemical Company will increase capacity of polyethylene and polypropylene by 600 kt/a and 250 kt/a respectively; Ningbo Skyford Chemical Co., Ltd., Shaanxi Yanchang Petroleum (Group) Co., Ltd. and Shaanxi Yulin Energy Group Co., Ltd. are all like to complete 600 kt/a MTO units, which will improve polyethylene and polypropylene capacity by 600 kt/a and 900 kt/a; furthermore, two PDH units that will be put into production will add 600 kt/a to polypropylene capacity.
   Considering the new capacity constructed in 2012 and possible restriction on polyethylene production, China’s output of synthetic resin is estimated to grow 6.3% YOY to 44.23 million tons in 2013 – polyethylene, 11.75 million tons, up 12.7% YOY; polypropylene, 12.47 million tons, increasing 10.2% YOY; polyvinyl chloride, 13.6 million tons, gaining 3.2% YOY.
2. Demand Estimation
China’s demand for synthetic resin is expected to grow steadily in 2013.
1) Packaging Industry
Most synthetic resin is made into polyethylene packaging film, BOPP film, knitting products and hollow containers, which will be used in packaging industry.
   Polyethylene packaging film is divided into three varieties – general, compound and functional. General polyethylene packaging film is estimated to develop steadily, and the other two kinds will develop faster.
   China has become the world’s largest BOPP film producer. New capacity will be around 200 000 tons in 2013, when domestic BOPP capacity is estimated to exceed 4 million tons, and output will increase more than 7% YOY to 2.8 million tons.
   Knitting products are produced mainly from polypropylene, and are widely used in packaging of food, cement and chemical materials. The demand for knitting products in China has increased steadily in recent years.
   In the field of hollow products, demand from large hollow containers (especially those above 500 L) for synthetic resin will grow rapidly. Small and medium sized containers will maintain stable demand for synthetic resin.
   It is estimated that the packaging industry will still play a role in propelling synthetic resin (especially polyolefins) consumptionin 2013 although it will face decelerated growth in both demand and export.
2) Agriculture
China’s agriculture developed steadily in recent years. Greenhouse planting areas exceeded 8.24 million acres, and around 51.07 million acres of planting areas were covered with mulching film. Synthetic resin consumption will be promoted by agriculture in the following aspects:
   a. Greenhouse planting area will increase 131 789 acres in 2013; the covering area of mulching film area, up 1.81 million acres;
   b.LDPE film and HDPE sheets will be used to reduce water seepage in agricultural irrigation;
   c. Livestock breeding and flower planting in greenhouses will be developed.
Although demand for synthetic resin from the production of agricultural film will grow slowly in 2013, livestock breeding industry’s demand is expected to increase rapidly.
3) Construction Industry
According to statistics, in 2012, China’s real estate enterprises realized RMB7.18 trillion in investment (up 16.2% YOY); 10.6 billion square meters in floor space of buildings under construction (rising 15.6% YOY); 2.4 billion square meters in completed floor space (increasing 6.2% YOY).
   The construction industry will keep stable growth benefiting from house price rebound and national continual investment in “housing projects for low-income urban residents”. In addition, building construction in western regions and disaster areas will also promote domestic demand for synthetic resin.
4) Auto Industry
Plastics are widely used in cars as inside gadget, outer decoration or functional parts. With consumers paying more attention to environment protection, vehicles become increasingly lighter through using more and more plastics. Plastics used in cars developed by China are 80-100 kg per vehicle; truck (light and medium), 40-50 kg; heavy truck, around 80 kg. And plastics used in vehicles introduced from foreign countries are 130-150 kg per vehicle.
　Vehicle output increased 6.3% YOY to 20.6 million in 2012. Because of purchase restriction policy adopted in many places, the output can hardly grow rapidly in 2013 and is expected to reach 20.8-21.5 million, rising 2%~6% YOY, lower than growth rate of last year.
5) Electronics
Output growth of home appliances dropped in 2012 impacted by the expiration of “home appliance going rural policy” and “old-for-new service”. The output of color TV, refrigerator, air conditioner, wash machine and computer totaled 782 million, increasing 4.3% YOY. However, in addition to TV output growth exceeding 10%, output growth rates of other kinds are all lower than 6% (refrigerator output down 3.1%). It is expected that the growth will rebound in 2013 to a certain extent, and output of major home appliance is estimated to reach 840 million, up 8% YOY.
   According to abovementioned data, China’s demand for synthetic resin in 2013 will increase 4.7% to 58.65 million tons – polyethylene, 18.9 million tons; polypropylene, 16 million tons; polystyrene, 5.2 million tons; polyvinyl chloride, 14.5 million tons; ABS, 4.05 million tons.

III Synthetic Resin Price Estimation

With China’s economic recovery, domestic demand for synthetic resin will grow gradually in 2013. Therefore, prices are likely to increase. Polyolefin prices are expected to fluctuate from RMB11 000/t to RMB12 500/t, and polyvinyl chloride prices will be around RMB7 000/t.