Domestic Polyolefin Capacity to Increase, Low Price

By Liu Xue, Sinopec Chemical Commercial Holding Company Limited

In 2015, the domestic polyolefin market first surged and then fell, continuing to fall afterward; the trend looks like an inverted “V”. All the products followed basically the same trend, but the polypropylene (PP) market saw a larger decline.  
The 2015 domestic polyolefin market can best be considered in three stages. The First stage: from January to mid February, due to weak demand and falling oil prices, the polyolefin market declined dramatically; The second stage: from late February to mid April, owing to weak sales, oil prices shooting up and futures prices rising sharply, the polyolefin market rebounded strongly; The third stage: polyolefin plants were tested and restarted production after May, domestic polyolefin output was sufficient, international oil prices sank to new lows, and the domestic economy responded to downward pressure, so the polyolefin market dropped continually.
Overall, the domestic market trend is closely related with international oil prices. (Refer to Figure 2.)
2016 market to stay in low consolidation pattern.

1. Domestic capacity will increase 14.3%

In 2016, more large-scale domestic coal chemical plants will be put into production, increasing capacity 14.3% (Refer to Table 1, Table 2).
According to incomplete statistics, in 2016, new polyethylene (PE) capacity will be 2.07 million t/a, PP 3.15 million t/a. PE capacity will reach 17.58 million t/a, up 13.3% over 2015;  PP will reach 24.2 million t/a, up 15% from 2015. If the planned units are put into operation in 2016, polyolefin capacity will far exceed demand, making overcapacity more serious.
According to the capacity expansion plan, low density polyethylene (LDPE) capacity will increase more sharply than all other polyolefin products in 2016, reaching 1.02 million t/a, up 45.3%. As demand rises only slowly, the market faces a severe test, and import will be constrained.

2. Apparent consumption will increase 7.8%

According to the situation of new-added domestic polyolefin devices in 2015 and planned new increment of production capacity in 2016, the expecting PE production will reach 14.28 million tons, increasing 7.6% YoY. Of which the capacity of LDPE will increase 27.5%, 540 kt. The domestic supply of PP will reach 25.2 million tons, increasing 1.8 million tons, rising 7.7% YoY, lower than the 19% in 2015. The domestic overcapacity, weak consumption, the plastic production industry eliminate backward production capacity, and deepen industrial structure adjustment lead to the contracted growth of plastic needs. In 2016, the expecting domestic apparent consumption will be more than 50 million tons, and the growth of apparent consumption is about 7.8% (Refer to Table 3).
Overall, in 2016, the polyolefin market will still be under high pressure, sustain in low consolidation pattern, and difficult to have market opportunities. LLDPE film material price is expecting between RMB7 500-9 500/t, and PP wire price is expecting between RMB5 500-7 500/t.          

Table 1    Increase of domestic polyolefin capacity, 2016

Products    Expansion of capacity (kt/a)    YoY Growth
(%)    Overall capacity
(kt/a)
Total synthetic resin    5 220    14.3    41 780
      PE    2 070    13.3    17 580
      LDPE    1 020    45.3    3 270
      HDPE            6 120
      LLDPE    1 050    14.8    8 190
      PP    3 150    15.0    24 200


Table 2    Added polyolefin capacity, 2016

Company     Capacity (kt/a)    Startup date
China Shenhua Coal to Liquid and Chemical Co., Ltd.    250 (LDPE)    March 2016
Jiangsu Sailboat Petrochemical Co., Ltd.?    400 ( LDPE)    April 2016
Zhongtian Hechuang Energy Co., Ltd.    370 ( LDPE)    August 2016
Zhongtian Hechuang Energy Co., Ltd.    300 (LLDPE +HDPE)    August 2016
Jiutai Energy Group    300 (LLDPE+HDPE)    August 2016
Shenhua Ningxia Coal Industry Group Co., Ltd.    450 (LLDPE)    December 2016
    Total PE    2 070
China Shenhua Coal to Liquid and Chemical Co., Ltd.    450    March 2016
Zhongtian Hechuang Energy Co., Ltd.    700    August 2016
Jiutai Energy Group    300    August 2016
Oriental Energy Co., Ltd. (Ningbo Fuji)    500    Q2 2016
Fujian Meide Petrochemical Co., Ltd.    400    June 2016
Huating Zhongxi Coal Chemical Co., Ltd.     200    September 2016
Shenhua Ningxia Coal Industry Group Co., Ltd.    600    December 2016
    Total    3 150


Table 3   The expecting domestic apparent consumption of polyolefin in 2016  (kt)

Product    Origin    2012    2013    2014    2015 (E)    2016 (E)
LDPE    Domestic production    1 960     2 010     2 050     1 960     2 500
    Net import    1 500    1 680    2 010    2 200    2 400
    Apparent consumption    3 460     3 690     4 060     4 160    4 900
HDPE    Domestic production    4 640     4 600     5 400     5 520     5 590
    Net import    3 870     4 630     4 440     5 100     5 500
    Apparent consumption    8 510     9 230     9 840     10 620     11 090
LLDPE    Domestic production    3 910     4 700     5 440     5 790     6 190
    Net import    2 220     2 310     2 420     2 550     2 750
    Apparent consumption    6 130     7 010     7 860     8 340     8 940
PE    Domestic production    10 510    11 310    12 890    13 270    14 280
    Net import    7 590    8 620    8 870    9 850    10 650
    Apparent consumption    18 100    19 930    21 760    23 120    24 930
PP    Domestic production    11 950     13 290     14 760     18 600    20 400
    Net import    4 940     4 830     4 870     4 800     4 800
    Apparent consumption    16 890     18 120     19 630     23 400     25 200