1. PP industry develops fast in China
After 2000, with the rapid development of China's petrochemical industry, the polypropylene (PP) industry has developed fast in China. The country’s PP capacity was 3.89 Mt/a in 2002 and increased to 19.19 Mt/a in 2014, having an average annual growth rate of 14.2% from 2002 to 2014. Meanwhile, China's PP production has also grown fast. Its PP production was 3.74 Mt in 2002 and grew to 13.77 Mt in 2014, having an average annual growth rate of 11.5% from 2002 to 2014. China has become the world's largest producer and consumer of PP. (Note: kt: 1 thousand metric tons; kt/a: 1 thousand metric tons/year; Mt: 1 million metric tons; Mt/a: 1 million metric tons/year;the same hereinafter)
At present, there are more than 80 PP producers in China, but PP plants are still mainly concentrated in the hands of CNPC (including PetroChina), Sinopec and other large state-owned companies. In 2014, CNPC and Sinopec had a combined PP capacity of 10.86 Mt/a, accounting for 57% of China’s total PP capacity, down 6 percentage points compared to 2009. The main reason for the decline is that there have been more and more new coal (or purchased methanol)-to-PP projects put into production in recent years and the entry of coal chemical enterprises into the PP industry has changed the pattern that PP was entirely produced by petrochemical enterprises in the past. There are 9 major coal or methanol-based PP producers in China, including: Shenhua Baotou Coal Chemical Co., Shenhua Ningxia Coal Chemical Co., Datang International Duolun Coal Chemical Co., Sinopec Zhongyuan Petrochemical Co., Ningbo Fund Energy Co., Shaanxi Yanchang ChinaCoal Yulin Energy and Chemical Co., ChinaCoal Shaanxi Yulin Energy and Chemical Co. (ChinaCoal Shaanxi Company), Ningxia Baofeng Energy Group Co. and Shandong Shenda Chemical Co..
In recent years, there have been large amounts of investment in China’s PP industry. New PP projects include oil refining/ethylene projects, coal chemical projects and propane dehydrogenation (PDH) projects, in which most are coal chemical projects. It is expected that nearly 30 PP projects will be put into operation in China after 2014, including 4 refining projects, 20 coal chemical projects and 5 PDH projects. If these projects are put into operation according to the plan, it is expected that by 2020, China’s total PP capacity will exceed 30 Mt/a, of which more than 30% will be the coal-based PP capacity.
2. High-end products are still imported from overseas
Despite the rapid growth of China’s PP capacity and output, its PP output is still unable to meet the domestic market demand and China needs to import large quantities of PP products each year. In 2010, China’s PP imports reached 3.868 Mt. In 2011, China’s PP production increased significantly, causing PP imports to drop to 3.778 Mt. In 2012, China’s PP imports increased slightly to 3.909 Mt, up 3.5% year on year (YoY) In 2013, the supply of home-made PP grew rapidly in China while the domestic demand for PP still grew slowly, so PP imports declined to 3.593 Mt, down 8.1% YoY. In 2014, China’s PP imports increased slightly to 3.632 Mt, up 1.1% YoY; but its PP exports were very small, only 126 kt.
In 2014, China’s largest source of PP imports was Korea and 874 kt of PP was imported from Korea, accounting for 24.1% of China’s total PP imports; followed by Saudi Arabia, 717 kt, accounting for 19.7%; Singapore ranked third, from which about 415 kt was imported, accounting for 11.4% of the total; finally followed by China’s Taiwan Province, India, the United Arab Emirates, Thailand, Japan, the United States and Brazil. In 2014, PP imports from the above 10 countries and regions accounted for 87% of China’s total PP imports. In recent years, PP imports from the Middle East have grown fast, while PP imports from China’s Taiwan Province, Japan and Thailand have declined and those from other regions have kept relatively stable.
The downstream consumer market of PP in China is mainly concentrated in eastern and southern Chinese regions, so PP-importing areas are mainly concentrated in Guangdong, Zhejiang, Jiangsu, Shandong and Fujian provinces and Shanghai. In 2014, the combined PP imports of the 6 provinces amounted to 3.202 Mt, accounting for 88% of the national total PP imports. PP imports of every Chinese region in 2014 were basically flat with 2013.
The import trade modes of PP in China are mainly general trade and imported materials processing trade, which accounted for 45% and 41% of China’s total PP imports in 2014, respectively. In addition, bonded warehouse re-export and processing trade accounted for 7.5% and 5.4%, respectively. It can be seen that a large proportion of China’s total PP imports are used for the foreign processing trade. Downstream manufacturers turn imported PP materials into products in China and then re-export the products to overseas markets.
3. Consumption structure of PP is evolving slowly in China
In recent years, with the rapid development of China's automotive, household appliance, construction, packaging and other industries, China's PP market has been growing rapidly. China’s PP consumption was 12.28 Mt in 2009 and increased to 17.27 Mt in 2014, with am average annual growth rate of 7% from 2009 and 2014. In China in 2014, PP was mainly used in weaving products, plastic products, films, fibers, pipes and other products and widely used in packaging, household appliances, automobiles, fibers, building pipes and other fields. Wiredrawing and injection molding account for a sizeable proportion in the total consumption of PP in China, followed by film materials, fibers and other application areas.
Fig. 1 Consumption structure of PP in China in 2014
The largest consumer area of PP is woven bags, packing bags, bundling ropes and other woven products and their consumption accounts for 35% of China’s total PP consumption. The injection molded products area is the second largest consumer area of PP and will be one of the largest potential PP consumer areas in the future. It accounted for about 26% of China’s total PP consumption in 2014. The third largest application area of PP is film products, which accounted for about 20% of China’s total PP consumption in 2014. In the fiber field, PP is now mainly used for the production of polypropylene fiber (long and staple fiber) and non-woven cloth. The fiber field accounted for about 9.5% of China’s total PP consumption in 2014, in which non-woven cloth accounted for about 60%. Figure 1 shows China’s PP consumption structure in 2014.
China’s PP consumption structure is quite different from those of European countries and the USA. Currently, in Western Europe, North America, South America, the Middle East and other regions, the largest consumer market of PP is plastic products, which account for 30% to 50% of the total PP consumption; followed by the film market, which accounts for about 20%; the fiber market ranks third, accounting for 15% to 20%; and the wiredrawing field accounts for only 10% or less. It is expected that China’s PP consumption structure will keep changing: the proportion occupied by injection molding, film, fiber, pipes and other fields in China’s total PP consumption will increase, while the proportion occupied by the woven product field will decrease.
4. Conclusion
As the downstream consumption of PP develops toward high technology and high added value, the demand for differentiated, high-performance materials is growing. Most of existing and new PP projects in China position their products as bulk materials. For example, PP products produced by coal chemical-based PP plants are mainly generic materials and are mainly used as wiredrawing materials. In recent years, by means of its advantages in raw materials, the Middle East has built many new large-scale PP projects and taken a low-cost, bulk product strategy to increase PP exports to China, leading to increasing competition in China's PP generic materials market. In the aspect of high-end special materials, the Chinese market is mainly occupied by products from Europe, America, Japan and South Korea. About 70% of PP imports in China are used as special materials. So it can be seen that structural surplus and structural shortage coexist in China’s PP market. Thus, Chinese PP producers should strengthen the research and development of special grades of PP products and enhance the proportion of high-end PP materials and special PP materials in their production structure, so as to improve their corporate competitiveness and strive for a greater market share and the maximum profits.