By Feng Yuanyuan, Sublime China Information (SCI)

Massive plant start-ups in the first half of 2023 but slowed capacity release in the second half of the year 

Biaxially oriented polypropylene (BOPP) film plants were put into mass production in China throughout 2023. As of November 2023, there were 12 new BOPP lines in total (excluding overseas production lines) put into production in China, with an aggregated capacity of 570 000 t/a. The new capacities were concentratedly released in the first half of the year, as seven new production lines were brought on stream during the period, while the pace of capacity release slowed down in the second half of the year. On June 8, Kinfilm - Kinlead New Material’s BOPP plant in Vietnam, was officially started up, marking the beginning of for Chinese BOPP coverage in overseas markets.  

With the continuous start-ups of China's BOPP plants, the products are positioned towards diversification and differentiation. In addition to traditional bag-making film and adhesive-tape film, the new plants are producing diversified products, such as thin film, matt film, heat-sealing film, smoke film, pearl film, and synthetic paper (see Table 1).

BOPP market: Reduced prices and squeezed profits

The BOPP market witnessed changes following the continuous start-ups of BOPP plants: BOPP prices kept decreasing in the most time of the year; producers reported lower profitability, and they were even in red some time (see Figure 1 and Figure 2).

Figure 1 Price curve of China’s BOPP thick film in 2023

Figure 2 China's BOPP gross profit in 2023

As for prices, the BOPP prices showed an M-shaped trend from January to November 2023, and were largely at the lower level during the same period of the past five years, and fell below the five-year low point in the most time of the period. The average price of BOPP thick film was at RMB9 054.5 per ton during January-November, down by 13.59% from the annual average level of RMB1 423.5 per ton in 2022.

In terms of gross profit, the profit margin of BOPP gradually decreased during January-November 2023, and was even negative some time. The margin room was around the five-year low and even below it for two months. The gross profits during the period were ranged between RMB-250 per ton to RMB410 per ton.

Although the pace of BOPP capacity release slowed down in the second half of 2023, there were five production lines with a total capacity of 335 000 t/a released in the fourth quarter (see Table 2). In the fourth quarter, BOPP prices fell again and the profit margin decreased as there were no clear signs of recovery in the demand. Therefore, how producers will move forwards in terms of start-up will be highly concerned.

Producers’ countermeasures in face of the massive start-ups but decreased prices and squeezed profits

With the continuously released new BOPP capacity in 2023, the pressure on BOPP market has gradually emerged, resulting in lower BOPP prices and squeezed gross profit room. Therefore, BOPP producers took countermeasures actively.

1. More BOPP plants were shut for maintenance from the second quarter 

In face of massive capacity release, BOPP producers shut more units for maintenance from the second quarter so as to ease the supply pressure caused by the increased capacity. Figure 3 shows the monthly operating rates of China's BOPP units from January to November 2023.

Figure 3 Monthly operating rates of China's BOPP units, January-November 2023

2. Producers switched to the production of high value-added products to proactively reduce operating rates

In addition to maintenance shutdowns, some BOPP producers made a tilt in their production, shifting from traditional bag-making films and adhesive-tape films to thin film (10μ~15μm), matt film, heat-sealing film, etc. to reduce operating rates.

3. Producers targeted customer base toward downstream and terminal players

BOPP producers actively changed their sales strategies, transferring their customer base towards end-users to stabilize processing costs and reduce the number of trading customers.

In a nutshell, China's BOPP market saw that plants were started up concentratedly and producers stretched arms into overseas markets through 2023. The capacity ramp-ups were not blind and instead, they tended to be diversified and differentiated. In addition, BOPP producers also made some countermeasures, such as penetrating customer base into end-user segments and switching to the production of high value-added products, so as to ensure the healthy development of the BOPP industry. BOPP producers still have new start-up plans, and the progress of them should be paid close attention to.