Domestic PP Must Shift toward High End

By Gao Liping, China National Chemical Information Centre

Rapid development

After 2000, the development of China's polypropylene (PP) industry accelerated along with the rest of the petrochemical industry. In 2002, China’s PP capacity was 3.89 million t/a, and it increased to 19.19 million t/a by 2014, with average annual growth of 14.2% between 2002 and 2014. In 2002, the output of Chinese PP was 3.74 million tons, and it increased to 13.77 million tons by 2014, with average annual growth of 11.5%.
At present, there are more than 80 polypropylene producers in China, but most of the capacity belongs to large state-owned companies such as China National Petroleum Corporation (CNPC) and Sinopec. In 2014, CNPC and Sinopec operated 57% of the nation’s PP capacity, amounting to 10.86 million t/a, down 6 percentage points from 2009, mainly because of the increasing number of newly built coal-to-PP or methanol-to-PP units. The nine main enterprises using coal or methanol to produce PP are China Shenhua (Baotou) Coal Chemical Industry Co., Ltd., Shenhua Ningxia Coal Industry Group Co., Ltd., Inner Mongolia Datang International Duolun Coal Chemical Co., Ltd., Sinopec Zhongyuan Petroleum Chemical Co., Ltd., Fund Energy (Ningbo) Co., Ltd., Shaanxi Yanchang Coal Yulin Energy and Chemical Co., Ltd., China Coal Shaanxi Yulin Energy and Chemical Co., Ltd., Ningxia Baofeng Energy Group and Shandong Shenda Chemical Co., Ltd.
Nearly 30 projects were expected to be put into operation after 2014, including 4 refining projects, 20 coal chemical projects and 5 propane dehydrogenation (PDH) projects. It is expected that China’s total PP capacity will exceed 30 million t/a by 2020, if all this new capacity is successfully completed and put into production.


Table 1    Main PP producers in China, 2014

Enterprises    Capacity
(kt/a)    Remark
Sinopec    6 620    39 continuous-method units
CNPC    4 240    23 continuous-method units
Shenhua Group    1 300    Coal based
Zhejiang Sanyuan Petrochemical Co., Ltd.     600    2 devices, with 300 kt/a capacity for each
Inner Mongolia Datang International Duolun Coal Chemical Co., Ltd.    460    Coal based; startup in March 2012
Formosa Plastics Group (Ningbo)    450    Put into operation in 2008
Fund Energy (Ningbo) Co., Ltd.     400    Put into operation in 2013
North Huajin Chemical Industry Group Corp.    310    Under China Norinco Group
Shaanxi Yanchang Petroleum Co., Ltd. Yanan Refinery    300    
CNOOC and Shell Petrochemical Company Limited    260    
Others    4 250    
Total    19 190    


High-end products must still
be imported

Although domestic capacity and production have grown rapidly, the market demand still cannot be met, and a large quantity of PP products is imported every year. In 2010, China imported 3.868 million tons of PP. In 2011, domestic PP production increased sharply, leading imports to decline to 3.778 million tons. In 2012, the import volume rose slightly to 3.909 million tons, an increase of 3.5% YoY. In 2013, the domestic supply grew substantially, while demand growth was slow. The import volume of PP fell to 3.593 million tons, down 8.1% YoY. In 2014, the import volume rose slightly, up to 3.632 million tons, an increase of 1.1% YoY; the export volume was very small – only 126 kt.
In 2014, the largest source of China’s imported PP was South Korea, providing 874 kt, 24.1% of the total; second was Saudi Arabia, providing 717 kt, or 19.7%; third was Singapore, providing about 415 kt, or 11.4%; after these, followed China Taiwan region, UAE, India, Thailand, Japan, the US and Brazil. In 2014, around 87% of all the imported PP came from these ten sources. In recent years, imports from China Taiwan region, Japan and Thailand have declined, while imports from other regions are relatively stable.
China’s PP market is concentrated mainly in East and South China, so the PP importers are mainly in Guangdong, Zhejiang, Jiangsu, Shanghai, Shandong and Fujian. In 2014, the import volume of these six areas was 3.202 million tons, or 88% of the national total.
China's main import trade modes for PP are general trade and processing by imported materials trade. In 2014, the import volume in these two modes accounted respectively for 45% and 41% of all imported PP. In addition, bonded warehousing and entrepot trade and processing by supplied materials trade accounted respectively for 7.5% and 5.4%.

Consumption patterns are gradually evolving

In recent years, China’s PP market has grown rapidly, driven by the auto industry, home appliance manufacture, construction, packaging and other industries. Domestic PP consumption was 12.28 million tons in 2009 and 17.27 million tons in 2014 – average annual growth of 7%.
The biggest consumer of PP in China is the woven fabric sector, procuring such PP-based products as woven bags, packing bags and rope, accounting for 35% of total consumption. Injection molding is the second largest consumer, taking 26% in 2014, and it is also one of the areas with the biggest potential demand in the future. The third application of PP is the manufacture of film products, taking 20%. In the fiber field, PP is always used to produce polypropylene fiber (long and short fiber) and non-woven fabrics. In 2014, the fiber sector consumed approximately 9.5% of all PP; non-woven products accounted for over 60% of that. Figure 1 shows China’s PP consumption pattern in 2014.
It is expected that China’s PP consumption mix will continue to change. Consumption in injection molding and the manufacture of films, fibers and tubes will increase, and the proportion in the woven products area will decline.

Conclusion

China’s PP supply and demand have become more balanced. However, 20% of the PP used here is still imported. The main reasons are as follows: domestic producers mainly make general PP materials, while high-end materials and special materials must be imported; the processing trade of the domestic PP-consuming industries and OEMs’ special requirements for imported raw materials drive import.
With PP consumption developing toward higher technology and greater added value, the requirements for distinctive raw materials with high performance grow continually. However, China’s existing and new capacity is mainly capable of producing basic products – e.g., the main coal chemical-based PP products are general materials, mainly drawn/spun materials. The high end of the domestic market is dominated by products from developed economies such as Europe, the US, Japan and Korea. Currently, 70% of imported PP is special materials.