Polypropylene high speed expansion in South China

The planned addition of polypropylene capacity in China in 2022 remains relatively concentrated, but most of the new capacity has been delayed to some extent due to the impact of public health events.  According to Lonzhong Information, as of October 2022, China’s new polypropylene production capacity totaled 2.8 million tons, with a total production capacity of 34.96 million tons, with a capacity growth rate of 8.71%, which is lower than that in 2021.  However, according to statistics, there are still nearly 2 million tons of new production capacity planned in November and December. If the production schedule is ideal, then the total amount of new polypropylene production capacity is expected to hit a new record in 2022.

In 2023, high-speed capacity expansion is still on the way. In terms of new installations, energy prices remain high, leading to continued high production costs of enterprises;  At the same time, the impact of the epidemic is still not subsiding, the demand is weak, resulting in pressure on the price of products, low economic benefits of enterprises and other factors, increasing the uncertainty of new equipment production, even if the landing there is still a delay probability.

If the current situation continues without improvement, the stock enterprises will carry out their own production and sales planning and implementation in the future based on controlling losses and seeking profits.  The new capacity of PP is concentrated in the first quarter and the fourth quarter. The unfulfilled capacity at the end of 2022 will be landed in the first quarter. The mass production pressure is reflected in the 2305 contract, and the pressure will be greater at the end of 2023.

With the growth of domestic demand gradually slowing down, the contradiction between supply and demand is becoming more and more aggravated, the overall surplus of general material is already on the road, China’s polypropylene industry will usher in a new round of supply and demand balance.  At the same time, looking at the world, due to the rapid growth of China’s production capacity, polypropylene has become a global product, but it is still facing a large but not strong situation.  As the largest producer and consumer of polypropylene, China should focus on the perspective of globalization, based on the domestic market, specialization, differentiation, high-end development direction.

In terms of production areas, East China and South China have become the main polypropylene production bases in China. Most of the plans are for supporting integrated devices or supporting terminal capacity of emerging routes, which have three advantages of capacity, cost and location, so that more and more enterprises choose to settle in and put into production in these areas.  From the perspective of the overall production area, South China has become a concentrated production area. It can be seen from the supply and demand pattern of South China that the consumption in this area is strong, but the supply is chronically insufficient. In the domestic regional balance, it is a region with net resource inflow, and the inflow has been increasing in the past two years.  During the 14th Five-Year Plan period, the PP production capacity in South China is expanding rapidly, Sinopec, CNPC and private enterprises are accelerating their layout in South China, especially in 2022. It is expected that 4 sets of devices will be put into operation. Although from the current information, the production time is relatively close to the end of the year, from the production experience, it is expected that some of them will be delayed to the beginning of 2023, but the concentration is high.  In the short term, the rapid release of capacity will have a big impact on the market.  The gap between regional supply and demand will narrow year by year and is expected to be only 1.5 million tons in 2025, which will significantly increase the pressure of supply saturation.  The surge of resources will make the polypropylene market in South China more competitive in 2022, and put forward higher requirements for the division of equipment and product structure adjustment.

Strong demand to promote the gradual increase of supply in South China will change the existing sales area, in addition to regional resources digestion, some enterprises also choose to deploy north consumption, at the same time the direction of product production is also rapidly adjusted, C butyl copolymer, metallocene polypropylene, medical plastic has become the object of research and development of major enterprises, both to make money and to go the amount of expectations are gradually realized.

With the increase of the plant production capacity, the self-sufficiency rate of polypropylene will continue to increase in the future, but the situation of structural oversupply and insufficient supply still exists, on the one hand, low-end general purpose products surplus, on the other hand, some high-end copolymer polypropylene will still be mainly imported products, the domestic general purpose polypropylene competition will be further intensified in the future,  The market price competition will be more fierce.

Post time: Nov-09-2022