PE Supply Falls Short of Demand, Restructuring Needed

By Gao Liping, China National Chemical Information Centre

Rapid output growth

By the end of 2015, China’s PE capacity reached 14.92 million t/a. HDPE capacity was 7.65 million t/a (including 2.05 million t/a all-density PE units), LLDPE capacity was 7.37 million t/a (including 2.05 million t/a all-density PE units) and LDPE capacity was 1.95 million t/a.
PE output in China was around 13.96 million tons in 2015. HDPE output was 5.58 million tons, LLDPE output was 6.37 million tons and LDPE output was 2.00 million tons. Coal chemical plants that recently started production mostly use vapor-phase process technology. The technology can switch production between LLDPE and HDPE. LLDPE is more convenient in respect of production technology and market access, so most new PE enterprises choose to produce LLDPE. LLDPE output therefore drastically increased further in 2015 and exceeded HDPE output.
With the development of the modern coal chemical industry, raw materials for PE are more diversified. By the end of 2015, the capacity of PE units with coal (including methanol) as raw material reached 1.86 million t/a, accounting for 12.5% of the total.
Sinopec is the biggest PE producer in China today. The PE capacity of the company is 7.00 million t/a, accounting for 47% of the national total. PetroChina’s PE capacity is 5.06 million t/a, holding second place and accounting for 34%. The capacity of PE in other refining & chemical enterprises, such as CNOOC and Shell Petrochemicals Co., Ltd., Panjin Ethylene Co., Ltd. and ChemChina, accounts for only 7% (see Table 1 for details).
Due to the considerable shortage of PE in China, most new ethylene projects take PE as the major downstream scheme. New PE projects in China have a capacity exceeding 7.00 million t/a and most of them are coal chemical projects. It is expected that the PE capacity added in 2016 (including three LDPE units) in China will be over 1 million t/a.

Table 1    Major PE producers in China, 2015

Producer    Capacity (kt/a)    Remarks (number of units, variety of products)
Sinopec    7 000    36 units (including joint ventures), HDPE, LLDPE and LDPE
PetroChina    5 060    33 units, HDPE, LLDPE and LDPE
Yanchang Coal Yulin Energy & Chemical Co., Ltd.    600    2 units, HDPE and LLDPE
CNOOC and Shell Petrochemicals Co., Ltd.    510    2 units, HDPE and LDPE
Panjin Ethylene Co., Ltd.    445    2 units, HDPE
Shenhua Baotou Coal Chemical Co., Ltd.    300    1 unit, LLDPE and HDPE
China Coal Shaanxi Yulin Energy & Chemical Co., Ltd.    300    1 unit, LLDPE
Ningxia Baofeng Energy Group Co., Ltd.    300    1 unit, LLDPE
Pucheng Clean Energy Chemical Co., Ltd.    300    1 unit, LLDPE
ChemChina    100    1 unit, LLDPE
Total    14 915    


Table 2    China’s foreign trade in PE , 2010-2015

    Import    Export
    Volume
(kt)    Value
(US$ million)    Volume
(kt)    Value
(US$ million)
2010    7 358    9 742.6    158    229.0
2011    7 443    10 869.6    322    486.3
2012    7 888    10 929.9    288    430.0
2013    8 816    13 145.0    203    326.4
2014    9 108    14 325.1    249    410.4
2015    9 866    12 623.7    269    381.1



High-performance products depend on import

PE is a major large-volume import chemical. The variety with the highest import volume is HDPE. LLDPE comes next. High-performance products (such as metallocene PE, C6/C8 PE and special PE brands for fuel gas pipes and automobile oil tanks) are mostly imported. China imported 4-5 million tons of PE annually before 2009. The volume went up sharply to 7.41 million tons in 2009, 64.8% higher than in the previous year. The volume increased in the following years. It rose to 9.87 million tons in 2015, and the average annual growth was 4.9% during 2009-2015 (see Table 2 for details). The import volume of HDPE was 5.13 million tons in 2015, accounting for 52% of the total. The volume of LLDPE was 2.56 million tons, accounting for 26%. The import amount of LDPE was 2.18 million tons, accounting for 22%. The output of LDPE in China was stable during 2009-2015, whereas demand increased constantly. Its import amount, therefore, picked up fastest during the period, and the average annual growth was 8.3%. HDPE came next and the average annual growth of its import volume was 4.9%. As the domestic supply of LLDPE increased rapidly, the average annual growth of its import volume was the slowest, being only 2.6%.
China’s main source of imported PE in 2015 was Iran, which supplied 1.68 million tons, 17% of the total. Varieties imported from Iran were mainly HDPE and LDPE, and the import amount of LLDPE was very small. The second major import source was Saudi Arabia, and the amount imported was 1.61 million tons, accounting for 16.3%. The variety with the highest import amount was HDPE, and LLDPE followed behind. The United Arab Emirates held the third place and the amount imported was 1.11 million tons, accounting for 11.3%. Among varieties, HDPE was most imported. Korea held the fourth place, supplying 1 million tons, or 10.2%. Thailand held the fifth place, supplying 901 kt, or 9.1%. Singapore held the sixth place, supplying 797 kt, or 8.1%. Other sources were Qatar, the United States, Taiwan, Kuwait and Malaysia in order of import amount. The Middle East has become the biggest source of imported PE, accounting for around 53%.

Demand growth getting stable

With the stable development of downstream sectors in China such as films, blow molded products, injection molded products and pipes, the demand for PE is going up. The drastic price reduction of crude oil has also led to a price drop of PE and the growth of PE demand has been stimulated to a certain extent. The demand for PE exceeded 23 million tons in 2015, being over 7% higher than in the previous year, and growth was basically equal to that in the previous year.
The biggest consumption sector of PE in China in 2015 was the production of films (including small amounts of boards), consuming over 12 million tons and accounting for over 50% of the total. Injection molded products came next, accounting for 16%. Blow molded products held third place, accounting for around 10%. Other consumption sectors include the manufacture of pipes, fibers, electric wires/cables, extruded/coated products and roll molded products.
Owing to the drastic reduction of crude oil prices and the firm prices of PE, the profitability in PE producers was encouraging in 2015. The overall operating rate of PE units was around 93%, a relatively high level. There was only 1 new PE unit in China in 2015, the 300 kt/a all-density PE unit in Pucheng Clean Energy Chemical Co., Ltd.
China is still in a state of PE shortage. Import dependence was 42% in 2015. A great number of PE projects being constructed or planned for construction will start production in the next five years, and most of them are coal chemical projects. It is expected that China’s PE self-sufficiency will improve constantly in the future.