HDPE: Supply-Demand Gap May Narrow

By Gao Liping, China National Chemical Information Center

Polyethylene (PE) is one of synthetic resin varieties with considerable amount of output. According to its production processes, PE can be classified into three major varieties: high-density polyethylene (HDPE), low-density polyethylene (LDPE) and linear low-density polyethylene (LLDPE). In PE varieties HDPE has the biggest output and consumption.
HDPE is a thermoplastic resin with high crystallinity. Compared with LDPE and LLDPE, HDPE has the smallest extent of branching and the highest density (0.94g/cm3 and above). It has great impact resistance, temperature and oil resistance, steam/air permeation resistance, environmental stress cracking resistance, good electric insulation and high tensile strength and stiffness. HDPE has extremely small water absorption, no toxicity and excellent chemical stability. HDPE is mainly used in blow-molded hollow products, injection-molded products, packaging films, greenhouse films, pipes and fibers.

Sustained growth of production and consumption worldwide

The average annual growth of the HDPE capacity in the world was around 9% during 2008-2013. The total capacity in the world reached more than 49.00 million t/a in 2013. Nearly 20% of the capacity can be switched for the production of LLDPE. The capacity for HDPE production in Asia ranks first worldwide and accounts for around 40% of the world total. North America, the Middle East and West Europe come next. The United States is still the largest HDPE producer in the world and its capacity accounts for around 16% of the world total. China holds the second place and its capacity accounts for 15% of the world total. It is expected that pushed by the cost advantage of raw materials in the Middle East, the development of shale gas in the United States and the development of the coal chemical industry in China, the capacity for HDPE in the world will still have a stable growth in the next five years.
The consumption of HDPE in the world was around 35.00 million tons in 2013, an increase of around 4% over the previous year. Major application sectors include blow-molded products, films and sheets, injection-molded products and pipes. Packaging materials are the largest consumption sector, followed by the automobile industry, construction materials, consumer goods and industrial supplies, respectively. In West Europe and North America the consumption in blow-molded products and injection-molded products is quite high. In Asia, however, the consumption in films is more than twice the consumption in North America and West Europe. Asia still has the largest HDPE consumption region and its consumption accounts for around 40% of the world total. With the further improvement of the world economy, especially in emerging economies, application sectors of HDPE will make constant expansion and the demand for HDPE will have stable increase in the next five years. Regions with fast demand growth will mainly include Asia-Pacific Region, Central/East Europe, the Middle East and South America. China and West Europe will remain to be major HDPE importers in the future.

Considerable supply-demand gap in China

The capacity for HDPE in China was around 3.00 million t/a in 2008 and reached 7.25 million t/a in 2013 with an average annual growth of 18%. New capacities in China in 2013 included the 250 kt/a unit in Sinopec Qilu Petrochemical Co., Ltd. and the 300 kt/a unit in Sinopec Wuhan Petrochemical Co., Ltd. The output of HDPE in China was around 4.00 million tons in 2013, an increase of 6.4% over the previous year. The overall operating rate of production units was just slightly above 60%. One reason for the relatively low operating rate is that about 3 million t/a of the total capacity can be switched to produce LLDPE. In China, HDPE has larger output and consumption than LDPE and LLDPE. The output of HDPE accounts for around 42% of the total PE output. The demand for HDPE accounts for around 47% of the total PE demand.
New HDPE capacity in China in the next five years will mainly come from coal chemical projects, refining & chemical integrated projects and renovation of ethylene projects, while that comes from coal chemical projects accounts for 80%. It can therefore be seen that the raw material structure of HDPE in China will have considerable changes in the future. The capacity for HDPE with coal as raw material will make a constant increase.
   In the future, great quantities of low-cost PE produced from ethylene based on natural gas in the Middle East and ethylene based on shale gas in the United States will be poured into the Chinese market; technologies for the production of coal-based ethylene will also become well developed and large scaled; the traditional petroleum-ethylene-polyethylene industrial chain will therefore have greater pressure. Compared with general-purpose varieties, high-end polyolefins have supply shortage in China and are mainly imported from Europe, the United States, Japan and Korea. Domestic enterprises should therefore strengthen the R&D and production of specialty HDPE varieties and develop high-tech products with high added value.
The HDPE production in China is mainly concentrated in the two oil giants, Sinopec and PetroChina. The capacity in Sinopec accounts for 44% of the national total, while that  in PetroChina accounts for 42%. CNOOC, Panjin Ethylene Industry Co., Ltd. and Baotou Shenhua Coal Chemical Co., Ltd. also hold some shares. Table 1 shows major HDPE producers in China in 2013.
As there is a considerable HDPE supply-demand gap in China, most newly-constructed ethylene projects also built HDPE production units as major downstream facilities. There are already reports on 20 new and expansion HDPE projects in China, and nine of them are exclusively for HDPE production, and the rest 11 projects can switch between HDPE production and LLDPE production. Meanwhile, 15 of new and expansion HDPE projects are coal chemical projects, showing a brisk development of China’s coal chemical industry. Figure 1 shows the present production status of HDPE in China during 2002-2013 and the projection for next 5 years.
PE is one of the bulk commodity chemicals with import priority in China. Among the three major varieties of PE, the import volume of HDPE is the largest. Despite the rapid growth of the capacity and the output, domestic HDPE producers still cannot meet the market demand and the import volume to China keeps going up. Reasons are as follows. In terms of general-purpose varieties, products from the Middle East have great price advantage. In terms of specialty varieties, domestic products can hardly complete with imported products in quality. Due to problems such as technology, some specialty varieties such as specialty resins for large hollow containers, automobile fuel tanks, fuel gas pipes, bottle caps and electric cables mainly depend on imports. The import volume of HDPE to China was maintained at 2.00-2.50 million tons during 2002-2008. A rapid increase of the import volume was made during 2008-2013. The import amount was 2.313 million tons in 2008 and reached 4.738 million tons in 2013 with an average annual growth of 15%.

Rapid growth of consumption

With the rapid development of packaging, automobile and construction material sectors, the consumption of HDPE in China has made a drastic growth in recent years. The average annual growth rate of the consumption reached around 13% during 2008-2013. The specific consumption structure of HDPE in China is around 20% for blow-molded products, 20% for films and sheets, 20% for injection-molded products and 20% for pipes, and the rest 20% is for fibers and others.
Owing to its high density, rigidity, good toughness and excellent processibility, HDPE is suitable for the production of various containers such as liquid food containers, household chemical containers, medicine and cosmetics bottles, industrial containers, automobile fuel tanks and engine oil bottles. The application in containers has become the largest consumption sector of HDPE.
As for films, HDPE is mainly used to produce packaging films and greenhouse films, while the consumption in packaging films accounts for 97%. HDPE is extensively used in the production of packaging films such as shopping bags, garbage bags, multi-layer lining films and industrial packaging films. Moreover, in recent years, HDPE films have been used as geotechnical engineering films in. For example, geotechnical engineering materials used in railway and highway construction are all produced from specialty high-strength HDPE films. Greenhouse films produced in China mainly include functional greenhouse films and conventional greenhouse films. Functional greenhouse films (the consumption of HDPE accounting for around 30% of the total consumption in greenhouse films) are mostly three-layer extruded composite films. Resin used in the outer layer is HDPE or LLDPE. Resin used in the middle layer is EVA or the blend of EVA with HDPE and LLDPE. Resin used in the inner layer is EVA or the blend of EVA with HDPE. Conventional greenhouse films are usually made from blend of specialty resin for HDPE greenhouse films with normal LLDPE.

Table 1   Major HDPE producers in China, 2013 (kt/a)

Producer    Capacity    Remark
Sinopec    3 205    13 units (including JVs) in 9 enterprises
PetroChina    3 040    13 units in 6 enterprises
Panjin Ethylene Industry Co., Ltd    445    2 units
Baotou Shenhua Coal Chemical Co., Ltd.    300    1 unit
CNOOC    260    1 unit
Total    7 250    

Injection-molded materials made from HDPE are mainly used in industrial packaging cases, shipping packaging cases, packaging boxes, trays, medium-sized bulk goods containers, fruit cases, fish baskets and also motorcycle components, bottle caps, food containers (such as frozen foods and ice creams), toys and household appliances (tableware, dish racks, ice cube trays, washing baskets and kitchen utensils).
HDPE pipes can be classified into water supply/drainage pipes, fuel gas pipes, mine pipes, farmland spray/dripping irrigation pipes and communication pipes (such as threading pipes, silicon core pipes and honeycomb pipes). Fuel gas pipes have strict requirements on properties of specialty HDPE resin. In addition to requirements on pure PE pipes, such special resin must also pass rapid cracking resistance test and PE100 certification. The consumption of HDPE specialty resin for fuel gas pipes in China mainly depends on imports.
HDPE is also used in fibers, electric wires/cables, coated products and foamed products. HDPE fibers mainly include monofilament and braided fabrics used to make ropes, fishing net threads and color stripped cloth.

Constant upgrading of self-sufficiency rate

With the completion of a group of large refining & chemical integrated projects and ethylene projects, both the capacity and the output of HDPE in China made a rapid increase during 2008-2013 and the average annual growth rate was respectively 18% and 10%. Despite the rapid growth of the HDPE production, the average annual growth of the consumption also reached 13%. The import volume of HDPE to China, therefore, made a constant increase, the market supply-demand gap had constant expansion to reach over 4.60 million tons in 2013 and the self-sufficiency rate was only slightly above 50%. A number of coal chemical projects under construction currently will be completed and put on stream in the next few years and the capacity for HDPE will make a rapid increase accordingly. With the improvement of people’s living standard, the construction of infrastructures and the urbanization in China, blow-molded hollow products, packaging films, injection-molded products and pipes made from HDPE will also have a rapid development. The demand growth of HDPE will therefore be promoted. It is expected that the supply gap of HDPE in China will make some reduction in the future but remain to be at a relatively high level, and the self-sufficiency rate will have constant increase.