Feng Yuanyuan, Sublime China Information
Biaxially oriented polypropylene film (BOPP) entered China in early 1960s, and the market saw domestic products of BOPP films (mainly electrical insulation and dielectric film) in 1975. Partial or complete large-scaled production lines with higher automation level have been introduced from Europe, Japan and the United States since 1980, to meet the extensive needs from various industries. With over 40 years’ development, China's BOPP industry has changed radically.
Supply-demand patten: tight balance → oversupply
Chart 1 analyzes the supply and demand of China's BOPP industry from 2010 to 2020, showing the pattern is developing from tight balance to oversupply. The supply was slightly higher than demand before 2012 with the industry operating rate over 80%. Then the capacity started to expand in 2013, and as the increase in supply exceeded that in demand, the load rate reduced 50%-60%.
Chart 1 China’s BOPP supply-demand analysis, 2010-2020
China’s BOPP capacity, 6 527 500 t/a in 2020, increased 3 441 900 t/a over 2010, with an average annual growth rate of 8.57%. The output in 2020 was 4 032 900 tons, up 1 512 700 tons compared with 2010, with an average annual growth rate of 5.84%. The apparent consumption went up from 2010’s 1 350 700 tons to 2020’s 3 748 400 tons, with an average annual growth rate of 5.53%. The industry operating rate was 61.78% in 2020, with the average level of 2010 to 2020 at 65.71%.
Supply development
1. Capacity expansion: rapid growth → slow growth
Chart 2 analyzes the BOPP capacity in China from 2009 to July 2021, by when the capacity has reached 6 668 500 t/a, with more than 100 manufacturers (including different subsidiaries of big groups) and over 200 production lines.
Chart 2 China’s BOPP capacity, 2009 – July 2021
China's BOPP capacity growth was rapid before 2014, in a band of 12%-16% and averaged at 14% annually. The expansion after 2014 slowed down to 1%-8%, averaged at 4% annually. However, the growth managed to reach 5.64% in 2019.
It was anticipated that the years 2020 and 2021 would see an intensive growth in capacity. However, due to the influence of COVID-19, the launching schedules were postponed, and there was only one new line added in 2020 and three new units launched in the first quarter of 2021. The expansion will continue in the next 1-3 years, with not only those already planned constructions but also the newcomers’ investments and the implementation of the integration of the upstream and downstream chain.
2. Distribution: from south to east and north
China’s BOPP industry started in southern area (Guangzhou and Foshan) and then shifted to eastern and northern areas to suit the economic development and market demands.
By 2020, East China (45%), South China (27.5%) and North China (12%) take the top 3 in terms of capacity. On the back of geographic advantage, East China has been in the top place in the past 10 years.
Chart 3 shows the provincial distribution of China's BOPP capacity. Zhejiang Province, with the largest shares in capacity, accounts for 22% of the total. It is closely followed by Guangdong Province and Jiangsu Province, accounting for 16.5% and 14.6% respectively. The above three provinces take more than 50% of the national total.
Chart 3 China’s BOPP capacity distribution by provinces
In addition to the top three, the top-ranked provinces include Fujian (largely thanks to the presence of FOROP and China Soft Packaging Group), Shandong (mainly due to many SMEs, especially in western and southwestern regions) and Shanghai & Liaoning (because of the new capacities from Jintian Group and new plants of China Soft Packaging Group).
3. Production unit: narrow → broad; slow → quick
With the continuous development, BOPP production equipment (biaxially oriented film line) has transformed from less than 4.0m at the beginning to 4.0-4.5m, 5.3-5.5m, 6.0-6.8m, 8.0-8.3m, 8.7m and 10.4m. The R&D of equipment of 12.0m has been proposed.
The production speed has been raised from 120-130m/min to 550m/min, with per line capacity up from 2 000 – 3 000 t/a to 45 000 – 75 000 t/a.
Table 1 shows that China’s BOPP units are all imported, with Brückner as the biggest one, taking over 50% of the units and 70% of the capacities, followed by Mitsubishi Heavy Industries and DMT.
Chart 4 compares China’s BOPP unit width and elimination rate and shows that this industry is developing to be faster and more efficient, and the outdated capacities will be washed out.
Chart 4 China’s BOPP unit width vs. elimination rate, 2020
4. Import: more self-sufficient and lower import dependency
The rapid development of BOPP has enabled China to be self-sufficient, with relatively small import amount, at 80 000 – 110 000 tons during 2009-2020, which was really a small figure compared to domestic supply. The import dependence was 2% to 4%. Chart 5 shows China's BOPP imports from 2010 to 2020.
Chart 5 China's BOPP imports, 2010 to 2020
China's BOPP imports are mainly high-end films, such as heat-sealing films, laser films and capacitive films, which are less produced locally. The import amount in 2020 was 88 900 tons, down 4.86% YoY, while the growth rate went up 13.36% from 2019’s -18.22%. The import volume in the first half of 2021 was 44 100 tons, up 3.52% YoY.
Chinese BOPP producers have been focusing on R&D of functional films, and therefore the demand for imports of these products will continue to decrease in the future. Under the influence of COVID-19 at home and abroad, China's BOPP import significantly decreased on subdued demand and reduced overseas supply.
In summary, China's BOPP industry is expanding rapidly, and the capacity distribution is geographically uneven. The production lines are developing in the direction of high-speed and cost-effectiveness. Domestic producers are doing R&D of high-end products, and China’s import dependence is not high. The main theme of the industry will continue to be capacity expansion, backward capacity elimination, production equipment efficiency optimization, and competitiveness enhancement. Meanwhile, research and development of high-performance products will also be one of the direction the development. The capacities might be moving to some new regions to meet the demand of enterprises such as Jintian New Materials, FOROP and China Soft Packaging Group.
Demand development
BOPP is very important to plastic film packaging industry. China's BOPP production in 2020 accounted for 26.64% of the total plastic film output, ranking No. 2 after PE film. About 90% of the BOPP production are supplied to domestic market, with 10% for export.
1. Apparent consumption grows steadily
Chart 6 shows the apparent consumption of BOPP in China from 2010 to 2020, indicating an overall growing trend during the whole period, despite of certain negative growths. The average annual growth through 2010 to 2020 was 5.05%. The apparent consumption in 2020 totaled 3 748 400 tons, rose by 56.33% over 2010.
Chart 6 China’s BOPP apparent consumption, 2010-2020
The continued growth in apparent consumption thanks to the capacity expansion and downstream demand increase.
While the negative growth during the period was on the heels of intensive capacity launchings: the slowing down during 2013 to 2016 was because of the intensive capacity expansion during 2008 to 2014, with annual capacity growth in the band of 12%-17%. The slowdown in 2018 and 2019 was due to the new capacity commercialized in 2017 as well as the stricter environment policies since the second half of 2017. With the downstream plants being more scaled and standardized, China’s BOPP apparent consumption growth once again went up in 2020.
2. Export takes only 10%, mainly ordinary film
Chart 7 shows that China’s BOPP export amounts were growing stably from 2010 to 2020, with an average annual growth rate of 7.9%. The exports in 2020 were at 373 400 tons, up 75.18% over 2010. China's BOPP exports through 2010 to 2020 accounted for 10% of production, with the amount in the range of 200 000 – 400 000 tons.
Chart 7 China’s BOPP exports, 2010 - 2020
China's BOPP exports are mainly ordinary glossy film, with very few high-end films such as heat-sealing film, pearl glossy film and capacitive film, which is also because Chinese BOPP manufacturers mainly produce glossy films. Only ten local producers export, including Yongning, Jintian New Material, Kelley, FOROP New Material, etc.
3. Demand structure changes gradually
In China, BOPP is mainly applied to sectors of food, clothing, tape, electronic appliances, tobacco packaging, cosmetics, flowers, stationery, medical and plastic weaving.
Chart 8 compares China’s BOPP derivatives in 2014 and 2020. The biggest downstream consumers are food packaging, clothing packaging, adhesive tape, electronics, and tobacco. Food packaging ranks No.1 with 50% shares, and clothing packaging was No. 2 in 2014 and then surpassed by adhesive tape in 2020.
Chart 8 China’s BOPP downstream structures in 2014 and 2020
The proportion of clothing packaging declined from 2014’s 13.6% to 2020’s 11.98%, which is mainly due to the replacement by BOPET, CPP and PE films and the overall slowdown in clothing production and sales.
The proportion of adhesive tape in 2020 was 22.25%, flat with 2014. It is a disposable product with a low entry barrier. The rapid development of express logistics and transportation stimulates the tape industry to expand.
There have been growths in other sectors. The year 2020, due to COVID-19, saw increases in BOPP demand from medical, cosmetics, and plastic weaving. According to the Bureau of Statistics, the added value of the pharmaceutical manufacturing industry grew by 5.9% in 2020. The plastic weaving laminate film also grew due to the implementation of the 2020 "Ban on Plastics".
In summary, China's BOPP demand has been growing at an average rate of 5% for the past ten years; exports account for a small percentage of 10%; and the demand structure is also adjusting. With the continued development of downstream fields, China's BOPP demand will maintain a steady growth rate, at 1%-6% in the next five years.
Demand pushes BOPP forward. Producers need to not only enhance their competitiveness in traditional sectors but also look for new applications to develop sustainably. China’s BOPP industry has witnessed rapid growth and slow transition from 2010 to 2021. The demand growth remained stable, with structure keeping optimizing, the supply changed from tight balance to excess, and the industry profits followed the pattern of supply-demand. The capacity is excess in 2021, however, the supply is temporarily short due to the adjustment of demand structure, leaving the profits at high. From the second half of 2021 to 2025, there will be 30 new production lines come on stream, bringing another capacity expansion. The competition will be fiercer, and the industry profits will be squeezed again.
