Reform of China’s Plastics Industry Urgently Needed

By Li Haina and Bao Ge, China National Chemical Information Centre

1. Growth of plastic products output decelerated
Domestic output of plastic products rose 8.99% in 2012, 8.02% in 2013 and 7.85% in the first eight months of 2014, and it is expected to grow 9%-10% annually from 2011 to 2015.
The slowdown could be attributable to the anemic demand arising from the global financial crisis, unreasonable structure of plastic products featuring a high proportion of low- and medium-grade products, overcapacity for certain products, and a lack of technical innovation.
2. Output of synthetic resin increased continually
From January to November 2014, China produced 63.35 million tons of synthetic resin and copolymers, up 10.7% YOY (polyethylene, 11.32 million tons; polypropylene, 12.52 million tons; polyvinyl chloride, 14.90 million tons; polystyrene, 1.95 million tons; ABS, 2.44 million tons). Apparent consumption of synthetic resin gained 7.8% YOY to 87.87 million tons in the same period.
3. Profits of the plastics industry fell, and fixed assets growth slowed down
The average profit rate for 2014 is estimated to have been 4.9%. Periodic overcapacity, insufficient investment in technologies, weakening innovation ability and unreasonable product structure were blamed for the profit decline.
In the first three quarters of 2014, fixed assets in rubber and plastic products went up 15.2% YOY, down 4.9 percentage points YOY.
4. Prices decreased
Decreasing crude oil prices reduced costs of raw materials for making plastics. Furthermore, many units resumed production in 2014, increasing the supply of plastics. However, domestic demand did not improve greatly at the same time, making plastics prices slide further down.
5. Exports grew
The export value of plastic products grew 4.6% YOY to RMB166.3 billion in the first nine months of 2014, when export volume rose 8.2% YOY, while import volume grew 1.5% YOY.
6. Plastic membrane market faces severe competition
Domestic demand for plastic membranes kept up an annual increase from 2011 to 2015 exceeding 20%, and output is estimated to reach 19.58 million tons by 2017. But the product structure is unreasonable. Excessive low- and medium-grade products and insufficient high-tech membranes make the competition tougher and make structural adjustment inevitable.

2015 Prospects

1. Biodegradable plastics will develop with good momentum
Global demand for biodegradable plastics was 1.10 million tons in 2013, and is likely to increase to 1.40 million tons by the end of 2014. The packaging industry will remain the largest consumer of biodegradable plastics, with the manufacture of packaging bags, gunny bags and packaging materials consuming most. In addition, applications in the fields of packaging membranes, automobiles and electronics will grow rapidly.
2. Recycled plastics granulator market will develop continually
As granules made from waste plastics have been in short supply, the domestic demand for recycled plastics granulators will keep growing.
3. Market value of engineering plastics will improve
Because of good stability, thermostability, chemical resistance and high strength, engineering plastics are increasingly used in the manufacture of automobiles, other transport, household appliances, electrical products, electronics, industrial machinery, packaging, medical implements and construction materials.
In 2013, the world’s market value of engineering plastics was approximately US$53.58 billion, expected to reach US$79.03 billion by 2018, with an annual growth of 8%. The Asian-Pacific region is the largest engineering plastics market, generating 47.9% of global demand in 2013.
4. Technical innovation adds impetus to reform the plastics industry
Future production will be characterized by personalization, high end, small quantities and customization. To meet such challenges, China’s plastics industry has to adjust product structure, strengthen innovation ability, and develop new markets by means of new materials, new technologies, new facilities and new products.