2013: An Extraordinary Year for China’s Synthetic Resin Industry

By Gao Chunyu, Sinopec Economics & Development Research Institute

Synthetic resin demand increased during the past year in China, but sales were still relatively sluggish. A price increase and the implementation of strict environmental protection policies helped improve the earnings of polyolefin producers, however. The “Hedgerow Action” implemented by China Customers has reduced the utilization of recycled plastics, and thus the apparent demand for synthetic resin grew markedly faster than in the previous year. In the coming year, several coal chemical and propane dehydrogenation units will start production in China. Low cost and high added value will remain as focuses for competition in the petrochemical industry.

1. Output grew slower than capacity

Makers of the five main kinds of synthetic resins in China – PE, PP, PVC, PS and ABS – maintained rapid capacity expansion in 2013. With the completion of large ethylene units by Ningbo Heyuan Chemical Co., Ltd. and Sinopec Wuhan Petrochemical Co., Ltd., the capacity for polyolefins in China increased drastically. PVC, PS and ABS capacity was also expanded. It is estimated that the capacity to make these five resins reached around 65.00 million t/a at the end of 2013. With impact from the slack market as well as unsatisfactory profitability and environmental protection worries at some units, the output growth was markedly lower than the capacity growth. The output of the five resins was 41.64 million tons in the first 11 months of 2013, an increase of 9.7% over the same period of the previous year. Of the total, the output of PE was 10.19 million tons, up 7.1% year-on-year; the output of PP was 11.48 million tons, up 11.8% year-on-year; the output of PVC was 12.41 million tons, up 10.2% year-on-year.
(1) PE
There were more than twenty PE producers in China in 2013. New capacity in 2013 mainly included a 300 kt/a HDPE unit and a 300 kt/a LLDPE unit of Sinopec Wuhan Petrochemical Co., Ltd. and a 250 kt/a HDPE unit of Sinopec Qilu Petrochemical Co., Ltd. The PE capacity in 2013 was 850 kt/a higher than in 2012, reaching 12.60 million. Of that total, LDPE capacity was 1.888 million t/a, HDPE was 5.263 million t/a and LLDPE was 5.455 million t/a. The output of PE in China reached 11.22 million tons in 2013, an increase of 6.8% over the previous year. Sinopec alone produced 6.55 million tons, around 58.3%; PetroChina made 3.36 million tons, accounting for around 29.9%.
(2) PP
There were more than 100 PP producers in China in 2013. New capacity in 2013 mainly included the 400 kt/a unit in Sinopec Wuhan Petrochemical Co., Ltd., the 350 kt/a unit in Ningbo Heyuan Chemical Co., Ltd. and the 200 kt/a unit in Xuzhou Haitian Petrochemical (Group) Co., Ltd. The PP capacity in China is estimated to have been over 15.00 million t/a in 2013, 1.10 million t/a higher than in 2012. Output reached 12.60 million tons, up 11.6% year-on-year. Of the total, the output of Sinopec was 5.80 million tons, accounting for 46.0%; the output of PetroChina was 2.65 million tons, accounting for 21.3%. With the construction of PP units by foreign-funded companies and by domestic enterprises, the percentage of the China-based capacity that is owned by Sinopec and PetroChina  has been decreasing steadily.
(3) PVC
There were more than 140 PVC producers in China at the end of 2013 and the capacity reached over 24.00 million t/a, being nearly 1.20 million t/a higher than 2012. Due to the rising price of calcium carbide and the increasing pressure to protect the environment, some East China PVC units that used calcium carbide have been shut down. The output of PVC in China reached around 15.00 million tons in 2013, an increase of around 12% from the previous year.

2. PE import boomed

Despite the rapid increase of output, import of the five resins grew slightly, reaching 15.765 million tons in the first 11 months of 2013, up 2.6% year-on-year.
(1) PE import grew rapidly, while import of the other four resins decreased
The import of PE to China continued its rapid growth, reaching 7.938 million tons in the first 11 months of 2013, an increase of 10.5% over the same period of the previous year. Of the total, the import volume of LDPE was 1.529 million tons, an increase of 5.5%; the import volume of HDPE was 4.303 million tons, up 17.5% year-on-year; the import volume of LLDPE was 2.107 million tons, up 1.6% year-on-year. The import of other synthetic resins in the first 11 months of 2013, however, declined by different degrees. The import volume of PVC was 956 kt, down 14.6% year-on-year. The import volume of PP was 4.485 million tons, down 3.0% year-on-year. The import volume of PS was 862 kt, down 3.9% year-on-year. The import volume of ABS was 1.524 million tons, a drop of 0.8%.
(2) The Middle East became a major resin provider
In recent years the import of the five main kinds of synthetic resins to China was mainly from the Asian-Pacific region and the Middle East, and also partially from the United States and Canada. The import volume of synthetic resins from nearby countries and regions declined in 2013. The import volume of synthetic resins from the Middle East reached 5.05 million tons in the first 11 months of 2013, accounting for around 30% of the total and being 2.0 percent higher than the same period of the previous year. It is estimated that around 57% of the 2013 import volume of the five resins was from Asian-Pacific Region, being 1.0 percentage point lower than the previous year. The volume imported from North America was also reduced by 1.0 percentage point.
(3) Guangdong’s percentage of the total import volume decreased but remained the largest
Provinces and municipalities that imported the most of the five resins in 2013 include Guangdong, Zhejiang, Shanghai, Shandong, Jiangsu, Fujian, Tianjin and Beijing. Guangdong’s volume remained the largest, at 5.245 million tons in the first 11 months of 2013, down 1.3% year-on-year and accounting for 33.4% of the domestic total. Zhejiang’s import volume has increased continually in recent years – it was 2.27 million tons in the first 11 months of 2013, with the percentage increasing from 13.8% to 14.4%.
(4) Proportionally, import as ‘general trade’ increased, while ‘processing’ decreased slightly
The mode of trade for synthetic resins imported to China saw no great changes in the first 11 months of 2013. The volume imported as ‘general trade’ was 8.102 million tons, an increase of 1.04 million tons, accounting for 50.1% of the domestic total (5.9 percentage points higher than the same period of the previous year). The volume imported for ‘processing of imported materials’ was 5.802 million tons, a drop of 367 kt from the same period of the previous year and accounting for 36.8% of the domestic total, being 5.3 percentage points lower than the same period of the previous year.
(5) Import prices were relatively stable
Since the world economy was still sluggish and the price of crude oil in the international market fluctuated with a downward trend in 2013, the price of synthetic resins fluctuated at a low level in the first half of 2013. With the recovery of the European economy, the price of synthetic resins increased somewhat in the second half of 2013. In 2013, the average price of LDPE in Southeast Asia was US$1 478/t, an increase of 12.8% from the previous year; the average price of LLDPE was US$1 441/t, an increase of 10.1%; the average price of HDPE was US$1 391/t, an increase of 5.7%; the average price of PP was US$1 453/t, an increase of 4.1%; the average price of PVC was US$1 011/t, an increase of 3.9%.

3. Consumption grew

The apparent consumption of the five resins in China was around 56.02 million tons in the first 11 months of 2013, up 7.6% year-on-year: around 17.94 million tons of PE, an increase of 9.2%; 15.80 million tons of PP, an increase of 7.3%; and 13.94 million tons of PVC, an increase of 9.3%.
(1) Import volume of recycled plastics plummeted
The utilization of recycled plastics in China has grown fast in recent years. The import volume of recycled plastics has therefore maintained a rapid increase. Since 2000, the import volume of recycled plastics has increased 3.5 fold, with an average annual growth of 16.0%. The import volume reached 8.878 million tons in 2012. In February 2013, however, Chinese customs launched a 10-month “Hedgerow Action.” As a consequence, the expense of importing recycled plastics to China increased drastically; administrative supervision became stricter; some recycled plastics had to undergo treatment in places of origin before export, and the import prices also increased. The import volume of recycled plastics in China during January-November 2013 was 12% lower than the same period of the previous year. It was the first drop in recent years. The drop for recycled ethylene plastics was bigger than average. The reduction of recycled-plastic consumption promoted consumption of freshly manufactured synthetic resins.
(2) Export growth accelerated
The export of synthetic resins from China resumed growth in 2013. According to customs statistics, the export volume of plastic products reached 7.72 million tons in the first 11 months of 2013, up 5.6% year-on-year, and the growth was 0.1 percentage points higher than in the same period of the previous year. The accelerated export growth also promoted consumption of synthetic resins.

4. Market price fluctuated with an upward trend

The price of synthetic resins in China in early 2013 continued the declining trend that had started in the previous year. The low level of prices persisted till April. Owing to a rise of crude oil prices in the international market and the reduced availability of recycled plastics, the price of synthetic resins rebounded slightly in May. Then, in the third quarter, as the European debt crisis eased and the crude oil prices rose, the prices of synthetic resins began to increase.
The prices of polyolefins in China fluctuated slightly in 2013. The prices decreased overall in the first half of the year but started to recover in the second half of the year. The prices of most polyolefins were higher than in the previous year. The average price of LDPE in 2013 was RMB12 053/t, an increase of 11.3%. The average price of LLDPE was RMB11 261/t, an increase of 8.4%. The average price of HDPE was RMB11 372/t, an increase of 5.0%. The average price of PP was RMB11 101/t, an increase of 0.2%.

5. Growth will be maintained in the future

The capacity for synthetic resins, polyolefins in particular, will further increase in 2014. PetroChina Sichuan Petrochemical Co., Ltd. will complete a 600 kt/a PE unit and a 250 kt/a PP unit. In addition, Yanchang Petrochemical Co., Ltd., Shaanxi Yulin Energy Group Co., Ltd., Baofeng Energy Group Co., Ltd. and Shenhua Ningxia Coal Industry Group Co., Ltd. will each construct a 600 kt/a MTO unit, increasing the PE capacity by 900 kt/a and the PP capacity by 1.40 million t/a. Many propane dehydrogenation (PDH) units will also start production in 2014, adding a combined PP capacity of 800 kt/a.
     The demand for these five main resins in China will maintain a stable increase in 2014, mainly driven by the rapid growth of the construction, packaging, electronic/electric and automotive sectors. It is expected that the demand for synthetic resins in China will reach around 65.50 million tons in 2014, an increase of around 4.5% over 2013. Of that total, the demand for PE will be around 20.80 million tons, an increase of 5.6%; the demand for PP will be 18.50 million tons, an increase of 6.3%; the demand for PVC will be 16.10 million tons, an increase of 5.9%.
Although international crude oil prices will likely come down in 2014, the prices of synthetic resins in China will fluctuate with an upward trend, due to gradual market recovery.