By Tan Jie, Sinopec Maoming PC

China’s coal-to-olefins and coal-to-LDPE sectors have developed rapidly in recent years; newly launched coal-to-LDPE capacities include Yulin Shenhua Energy’s 300 kt/a plant, Shenhua Xinjiang Energy’s 270 kt/a plant and Zhongtian Hechuang Energy’s 370 kt/a plant. In 2017, China's LDPE production capacity reached 3 093 kt/a. Sinopec (including joint ventures) operates 58.5%, PetroChina 15.0%, and CNOOC 8.1%. Yangzi-BASF is currently the largest LDPE manufacturer in China, with a capacity of 400 kt/a, which is 12.93% of all domestic capacity; followed by Sinopec Yanshan Petrochemical, with a capacity of 380 kt/a or 12.28% of the total. Northwest China is the largest LDPE production area in China; 24.9% of the national capacity is situated there; second is North China, hosting 24.3% of the total.
   In the next few years, the market will see more new LDPE capacity, including 220 kt/a operated by Baotou Shenhua, 200 kt/a by Ningbo Qiancheng Petrochemical, 225 kt/a by a joint venture of Shenhua and SAIBC, 200 kt/a by Zhongke Maoming and 100 kt/a by Sinochem Quanzhou. If these lines are all launched as planned, capacity is expected to reach about 4 030 kt/a by 2021. However, coal-based and methanol-based LDPE producers face both low oil prices and environmental protection challenges. With the nation’s economic slowdown, some projects may be financially stranded over the next few years.

   From 2008 to 2017, the import volume of LDPE kept increasing. In 2017, LDPE imports rose to 2 374 kt, up 15.7% YoY. Also, the average import price leapt to US$1 272.55/t, 3.8% higher YoY.
   China imports LDPE mainly from the Middle East (e.g. Iran, Saudi Arabia, Qatar, UAE) and the Asia Pacific region (e.g. South Korea, Malaysia, Thailand). In 2017, LDPE imports reached 2 374 kt. Shipments from Iran, Saudi Arabia, Qatar and the UAE totaled 1 285 kt, or 54.1% of total imports, a YoY increase of 18.9%. Iran has always been the largest LDPE import source for China. In 2017, Iranian shipments went up to 604.8 kt, or 25.5% of the total, an increase of 25.7% year-on-year. In 2017, imports from South Korea fell to 218.8 kt, a YoY decrease of 0.5%. Imports from the United States amounted to 154.9 kt, or about 6.5% of total imports, a YoY increase of 37.9%.
   Imports from Germany, the United States, and South Korea are mostly high-end materials, while products from Iran, Malaysia, and Saudi Arabia are mostly general-purpose ones. Import prices have declined in recent years. Imports from the United States decreased from US$1 932.33/t in 2014 (that year’s growth having been 19.6%) to US$1 430/t in 2017, with average yearly growth of 12.4%.
   China also exports a small amount of LDPE. The export volume in 2017 was 54 kt, a YoY decrease of 26.53%. China's LDPE is exported mainly to Hong Kong, Malaysia, Vietnam, North Korea and South Korea. Exports to these countries or regions totaled 25.4 kt in 2017, or 47.0% of all exports, a YoY decrease of 27.6%. In particular, exports to Vietnam accounted for 16.7% of all exports, a YoY increase of 47.5; Hong Kong accounted for 9.4%, down 68.7%; North Korea accounted for 8.0%, up 7.5%; Malaysia accounted for 7.0%, down 34.5%; and South Korea accounted for 5.9%, up 10.3%.

   In 2017, the apparent consumption of LDPE in China was 5 350 kt, used mainly in making materials for downstream industries: 71.8% for films and sheets, 9.6% for injection molding products, 7.7% for coatings, 4.2% for cables and 3.5% for pipes.
   LDPE-based film products include packaging films, architectural films, agricultural films, and food wrap films, but in some applications, LDPE competes with linear low-density polyethylene (LLDPE) and biaxially oriented polypropylene (BOPP) films. Manufacturers of injection molding materials and extrusion coating materials are also major consumers of LDPE. Although alternative materials exist in the injection molding sector, LDPE demand from makers of special copolymers and graft copolymers for extrusion coating is increasing. The growth rates of demand for film, sheet, and pipe materials are slightly faster than the overall growth rate of LDPE demand, and the growth of cable manufacture is slowing. Although LDPE is impacted by alternative materials in some film applications, its consumption in food and hygiene sectors are still rising. In addition, with the acceleration of urbanization during the “13th Five-Year Plan” period (2016-2020) and the acceleration of related infrastructure construction, the demand for pipe will increase, which will stimulate demand for LDPE.
   As LDPE is replaced by LLDPE in more applications, its consumption growth is slower than that of other polyethylene products. However, due to the excellent processing properties of LDPE and its ability to copolymerize with polar monomers to obtain special, high value-added products such as ethylene-vinyl acetate copolymer (EVA), ethylene-methyl acrylate copolymer (EMA), etc., it is still widely used in areas like highly transparent films, high-voltage cable insulation and basic food wraps.
   The pattern of LDPE consumption will not change greatly in the future. It is expected that China's consumption of LDPE will reach 6 100 kt by 2021. A relatively large amount will still be imported, especially high-quality products. As today’s LDPE market is bearish, the profits of such products are decreasing, and some are not profitable at all. But the LDPE market still has great potential for whenever the economy improves. The domestic coal chemical industry is also vigorously developing. Competition among diverse downstream products of ethylene, with LDPE prominent among them, will become more intense in the next few years. And with the diversification of sources of chemical raw materials, China’s LDPE market will witness the presence of naphtha chemical products, coal chemical products and imported products.