Rising Oil Prices Push Polypropylene Market Higher as China Sees Strong Demand and Capacity Expansion
Polypropylene (PP) is a thermoplastic resin and one of the five major general-purpose synthetic resins. It appears as white granules, is odorless and non-toxic, has a regular crystal structure, and possesses advantages such as easy processing, high impact strength, good flexural strength, and good electrical insulation. It has wide applications in the automotive industry, electrical appliances, electronics, packaging, building materials, and furniture. Polypropylene can be classified in various ways. Based on the spatial position of the methyl group (-CH3) in the polypropylene molecule, it is divided into isotactic, syndiotactic, and atactic types. Based on its application, it is divided into narrow-band, injection molding, extruded film, fiber, and extrusion grades. Based on monomer type, it is divided into homopolymer polypropylene and copolymer polypropylene.
The first concentrated production period was in 2014. Capacity growth slowed from 2015 to 2018. In 2019, domestic polypropylene plants entered another concentrated production period, and capacity growth is expected to increase.
In terms of regional distribution of production capacity, polypropylene production enterprises are becoming more regionalized and concentrated. In 2018, my country's polypropylene production enterprises were mainly distributed in Northwest, East China, North China, South China and Northeast China, accounting for 92.2% of the country's total production capacity.
From 2014 to 2019, my country's apparent consumption of polypropylene increased year by year, with an average growth rate of 8.4%. In 2019, apparent consumption of polypropylene reached 25.4956 million tons, with a growth rate of 6.7%, showing an improvement compared to the previous year. Based on a price of 9,000 yuan/ton, the market size exceeded 229.5 billion yuan.
In my country's downstream polypropylene sectors, the proportion of traditional applications such as fiber drawing and BOPP has shown a downward trend, while homopolymer injection molding, copolymer injection molding, transparent materials, and fiber materials have shown an upward trend.
From a regional perspective, the economically developed and rapidly growing North China, East China, and South China regions remain the main consumption areas.
my country's PP production capacity is mainly distributed in East China, South China, Northeast China, and Northwest China, while consumption is concentrated in East China, South China, and North China. Imported PP mainly flows into East China and South China. Therefore, the mainstream of national trade is concentrated in the Yangtze River Delta region (represented by Jiangsu, Zhejiang, and Shanghai), the Pearl River Delta region (represented by Guangdong), and the coastal areas of North China (represented by Shandong). The Northwest and Northeast are net outflows, and the supply to the Southwest region is mainly transferred from the Northwest and South China. There is a small amount of commodity flow between East China and North and South China.
In recent years, my country's polypropylene exports have been very low, while imports have initially declined and then increased. In 2019, China imported 3.49 million tons of polypropylene and exported 340,000 tons, with an import dependence of approximately 13.7%. In 2019, my country's main polypropylene import countries and regions included South Korea, Saudi Arabia, Singapore, the UAE, and Taiwan.
This is mainly reflected in costs. Polypropylene is derived from five sources: crude oil, coal, purchased methanol, purchased propylene, and PDH. Crude oil and coal account for approximately 80% of the price. Coal prices are relatively less affected due to long-term agreements, while crude oil has a greater impact on polypropylene prices.
When the economy enters an upward cycle, the downstream plastic products industry develops rapidly, resulting in strong demand, while the supply is relatively insufficient, which will promote the rise in polypropylene market prices.