By Zhang Zhihui, Zhuochuang Information

In 2021, China's polyolefin pipe material market picked up, and the prices of PE pipe materials and PP pipe materials rose significantly in two waves. Based on the supply and demand data, China's polyolefin pipe material market supply and demand tended to be balanced in recent years gradually .

Overview of supply and demand of polyolefin pipe materials in 2021

1. Supply analysis 

According to the supply and demand data from 2017 to 2021, China's PE pipe material market gradually developed from supply exceeded demand to balanced supply and demand, as shown in Table 1. Since 2017, the supply gap in the Chinese market has been decreasing year by year. Based on the data comparison, the supply gap from 2017 to 2020 was 23 000 tons, 20 000 tons, 5 000 tons, and 3 000 tons respectively. By 2021, the supply and demand of the Chinese market basically balanced, and the supply of PE pipe materials basically met the market demand. In terms of exports, although the large-scale export situation has not been verified and has little impact on the market structure, with the gradual increase in the supply of pipe materials in China, there may be corresponding exports in the future, and the current imported materials could be replaced by domestic materials. 

From 2017 to 2021, from the perspective of supply and demand data, China's PP pipe material market supply and demand gradually become more balanced in recent years. Benefiting from the recovery of the real estate industry in 2021, the growth rate of demand increased, as the supply also increased accordingly, and it remained basically balanced between supply and demand, as shown in Table 2. From 2017 to 2020, the demand gap was 30 000 tons, 80 000 tons, 57 000 tons, and 48 000 tons respectively. By 2021, the demand gap was 10 000 tons, and basically showed a balanced supply and demand. 

In recent years, the key factor affecting the changes in supply and demand in the PP pipe market were mainly petrochemical plants, including the production schedules, maintenance plans, and production plans. At present, the real estate market maintained a healthy development. Since PP pipes were highly related to the real estate market, the demand for PP pipe materials remained. Thereforethe key factor affecting the supply and demand structure of PP pipes was mainly on the supply side.

2. Demand analysis 

The only downstream industry of polyolefin pipe materials was the plastic pipe industry, and the plastic pipe industry was closely related to construction industry such as infrastructure construction and the real estate industry. From the current macro situation in China, although the downstream demand for polyolefin pipe materials no longer had the explosive growth as in previous years, the urbanization rate in China was still lower than that of developed countries, and there was still enormous room for improvement. Therefore, although the growth rate of demand in the plastic pipe industry gradually slowed down, it would still maintain a steady development trend in the future, and the industry would be more intensive and increasing scale, and the product quality would be higher. In 2021, the domestic plastic pipe production capacity was about 17 million tons/year, and it may reach 17.5 million tons/year in 2022. The average growth rate of production capacity in the next few years will remain at 2% to 3% (as shown in Figure 1).

Figure 1 Forecast of plastic pipe production and growth rate from 2002 to 2022

In 2021, under the policy of "housing is not for speculation, and policies are implemented according to local situations of each city", the central government comprehensively and accurately controlled the national real estate market from a global perspective, and timely warned and corrected deviations in cities with overheated markets to ensure the goal of stabilizing land prices, housing prices and expectations to be completed. The central government made intensive voices on the real estate market, and strictly implemented the main tone of the policy of "housing is not for speculation". In the first three quarters, the added value of real estate increased by an average of 4.8%, a decrease of 1.3 percentage points from the first half of the year, and the overall impact was limited. In the next stage, market players tended to be rational, the real estate market is expected to maintain steady development, and the demand for plastic pipes will remain stable.

Analysis of the price trend of polyolefin pipes in 2022 

In recent years, the domestic polyolefin production capacity will still at the peak. In 2022, domestic petrochemical enterprises are expected to expand their PE capacity by about 4 million tons/year, of which low-pressure units will expand capacity by 2.35 million tons/year. In 2022, PP plans to add 3.65 million tons of new production capacity per year. Part of the newly added production capacity may be put into production of polyolefin pipe materials, which will gradually increase the supply pressure of domestic polyolefin pipe materials. However, as the domestic economic growth slows down, the growth rate of demand for polyolefin pipe materials may be weaker than the growth rate of supply, resulting in a contradiction between supply and demand in the future. On the cost side, the prices of upstream raw materials ethylene and propylene may fluctuate weakly in 2022, and the cost side will weaken the support for polyolefin pipe materials. Combined with the current situation on the supply and demand side, it is expected that the price of polyolefin pipe materials will remain at a low level and fluctuate in 2022.

It is estimated that in 2022, the annual average price of PE100 water supply pipe material will be around RMB8 500/ton, the high point will be RMB9 500/ton, and the low point will be RMB8 200/ton, as Figure 2 shown. The market price may fluctuate and weaken from the beginning of the year, and price may rebound due to demand in the traditional peak seasons in April, May, September and October.

Figure 2 2021-2022 PE pipe material price chart

    It is estimated that in 2022, the price of PP pipe materials will be about RMB10 300/ton, with a peak price of RMB11 500 /ton and a bottom price of RMB9 300/ton. The average annual price will drop by about RMB500/ton compared with 2021, as shown in Figure 3. The price may be the high point of the whole year at the beginning of the year, and then fluctuates down. After falling to the lowest in the first half of the year in February, the market demand will increase in March, driving price to rebound slightly. By June, the market price fell again and in September it reaches the traditional peak season, and prices may rise again. It then fell back and remained weak until the end of the year. 

 Figure 3 2021-2022 PP pipe material price chart