PP Demand Increasing in China, Consumption Pattern Likely to Change

By Zhang Xiaojie, Tianjin Petrochemical Co., Ltd.

Rapid growth of capacity

China’s brisk demand for polypropylene (PP) has led to fast growth in the industry in recent years, with the completion of several large production units. At the end of 2015, China hosted 61 PP producers, with nearly 93 production units. From a capacity of 12.18 million t/a in 2012, capacity reached 17.78 million t/a in 2015, and output was 16.86 million tons, an increase of 22.7% over the previous year. Sinopec and PetroChina are the two giants of PP production, operating 6.21 million t/a and 3.96 million t/a of capacity, respectively. Figure 1 shows the capacity of major PP producers in China in March 2016.
A domestic PP supply shortage persists. Most new large projects integrating refining and ethylene and most coal-to-olefin projects are matched with downstream PP units. PP capacity is expected to keep growing dramatically. Most new PP units are capable of over 300 kt/a. If these PP plants are completed and put on stream according to plan, capacity will reach around 25.0 million t/a in 2020.
China still needs to import great quantities of PP. The import volume was 3.40 million tons in 2015, according to customs statistics. Major sources include Korea, Saudi Arabia and Singapore. The amount imported from these sources together in 2015 was 1.91 million tons, or around 56.26% of the total imported. Korea was the biggest source, providing 25.03% of the total imported.
Saudi Arabia and the United Arab Emirates have provided a rapidly increasing supply of PP in recent years. The Middle East has recently accelerated the development of propylene series products. The proportion of China’s imported PP coming from this region has grown sharply, affecting the overall pattern of PP import.
China also exports small amounts of PP. The export volume reached 166.4 kt in 2015, a significant increase of 32.38% over the previous year. Homopolymerized PP is the main grade exported, and copolymerized PP comes next.

Increasing demand & changing consumption pattern

Judging from the prospects of PP-based products, the growth of the PP demand is relatively stable. The proportion of PP consumed in the real estate sector has declined in recent years, but it remains the key sector, accounting for around 30% of the total consumption in 2015. Injection molding is second, accounting for around 27%. It is also one of sectors with the biggest potential for PP demand growth. The manufacture of films is another major sector consuming PP, especially for BOPP films. The manufacture of films accounts for 19% of PP consumption. Figure 2 shows the pattern of PP consumption in China in 2015.
Gradually, over the next few years, the PP consumed in the manufacture of woven products is expected to decline proportionally, whereas the proportion consumed in injection molding and the manufacture of fibers and pipes will grow. Other focuses for development will be high-transparency PP, anti-sticking nonwoven fabrics, melt-blown nonwoven fabrics, fine denier and superfine denier PP fibers, special materials for household electric appliances and special materials for automobiles.
Annual PP consumption in China is expected to reach 18.5-19.0 million tons in 2016. Economic transformation and innovative science/ technology will promote demand for high-end materials such as transparent materials for medial syringes and high-melt injection molding materials for electronic/electrical and medical apparatuses. Meanwhile, market demand for conventional drawing-grade PP will decline. The 2016 market for drawing-grade PP is expected to peak in March and April, and its top price will float around RMB7 000/t. Then, the market is expected to dip to a low in November and December, with prices below the risk line of RMB6 000/t.

Elimination of outdated capacity, enhancement of competitiveness

In China, PP units are often constructed to match ethylene plants and oil refining plants. The PP units are usually small- or medium-scale. The average capacity of PP-producing firms is less than 100 kt/a today, and the average capacity of individual PP units is no more than 70 kt/a. Due to the small scale of units, energy consumption and material consumption are both quite high per ton of output, and hence, product prices are necessarily not very competitive. With all the new foreign and domestic capacity coming on stream, China’s small and medium PP producers face long-term losses or closure.
Market competition is getting fiercer for large-volume general-purpose materials. In response, synthetic resin makers in China have paid greater attention to the production and development of special materials. In China’s PP production, special materials already make up around 40% of output, up from around 30% in 2005. Domestic brands of special materials have earned increasing market influence: Sinopec Yanshan Petrochemical Co., Ltd., provides special materials for washing machine cylinders; Sinopec Yanshan is joined by Sinopec Yangzi Petrochemical Co., Ltd. and Sinopec Qilu Petrochemical Co., Ltd. in providing special materials for motor vehicles; Sinopec Shanghai Petrochemical Co., Ltd. and Sinopec Maoming Petrochemical Co., Ltd. both make special materials for BOPP high-speed wrapping films; and Sinopec Yanshan, Sinopec Qilu. and Sinopec Yangzi. all make special materials for PP-B and PP-R pipes.