A Glance at 2024 China PP Key Annual Data
Introductions: China’s PP market prices were stable-to-rising slightly in 2024 amid a delicate balance between supply and demand, stemming from the joint action of various factors. On the supply side, although the PP (polypropylene) industry was still in a capacity expansion cycle, the actual release of new capacity was less than expected, alleviating the risk of oversupply in the market. At the same time, the reduction in imports alleviated the supply pressure to a certain extent. On the demand side, the procurement of feedstock in major downstream and end fields was insufficient. Due to the low processing profit and high finished product inventory, the actual deals were restricted, which suppressed the rise in PP prices. However, the increase in exports and the stimulation of national policies stabilized demand growth and underpinned PP market prices. In addition, the profitability of PP producers improved in 2024, but most producers were still in a loss-making state, supporting the PP price from the bottom line.
2024 China PP Annual Data Change
Key data interpretation:
1. PP prices rose at first but then dropped in 2024, and the overall fluctuation range narrowed.
China’s PP market prices grew at first but then fell in 2024. As of December 31, the annual average price of PP raffia in East China was RMB 7,541.55/mt, up 0.22% YOY. The highest price was RMB 7,795/mt in early July, while the lowest one was RMB 7,265/mt in early-to-mid January. The largest price spread was RMB 530/mt, which shrank YOY. First, China’s PP prices gained ground from January to early July on the back of stronger costs, less-than-expected supply growth and macro-related stimulus policy. Later, higher supply pressure and feedstock cost reduction undermined the PP market price. Although the industry entered the demand peak season from August to September, PP prices continued slipping because the actual downstream stock-up was softer than expectations and the macro environment turned weak. However, market sentiment improved due to the Fed’s interest rate cut and China’s deposit reserve ratio and interest rate reduction at the end of September. The PP futures prices also rebounded, and spot prices also followed that uptrend.
2. China’s PP capacity growth rate was 8.56% in 2024, and that of output was 7.38%.
China’s domestic PP industry witnessed continuous capacity expansion from 2020 to 2024. China’s PP capacity reached 40,220kt/a as of the end of 2024 with a growth rate of 8.56% YOY, which rose by 14,060kt/a or 49.93% from 2020. The CAGR of PP capacity was 11.57% from 2020 to 2024. PP market price and industry profit performed poorly in China as PP supply became gradually surplus. The commissioning of some fresh projects was postponed. It indicated that market players were more cautious with rapid capacity release. This directly influenced the vitality of new capacity and growth rate of output. China’s PP output reached 34,631.9kt in 2024, up 7.38% YOY.
3. PP industry profits rallied but stayed negative, underpinning PP prices from the bottom line.
In the past five years, the PP industry has experienced a process of turning from profit to loss. The profit loss has appeared and continued since the second half of 2021. Due to higher feedstock costs and weak market demand, the PP industry is facing losses in both production and sales, and industry prosperity remains at a low level.
Data in 2024 showed that the gross profits from producing coal-based, crude oil-based and PDH-based PP all recovered to a certain extent. Among them, the profit from oil-based PP production climbed to RMB -769.27/mt, up 22.06% YOY. Profits from coal-based and PDH-based PP production grew by 80.71% and 13.24% YOY to RMB -116.71/mt and RMB -618.71/mt respectively. Although profits rebounded, PP production profits based on major feedstock sources remained negative, reflecting that the overall PP industry was still in a stage of profit losses. Under this circumstance, the PP market price also got firm cost support.
Conclusion: In 2024, the cost supported the lower limit of PP prices, while demand constrained the upper limit of PP prices. This situation is expected to last for several years. Looking forward to 2025, the supply and demand fundamentals will still be the key drivers for PP market price trends. The continued expansion of capacity and the slowdown in demand growth will constitute factors that suppress the low operation of PP prices, making it difficult for PP prices to get rid of the weak downward situation in the short term. The positive macroeconomic expectations may provide some support for the price trend, which may slow down the downward trend to a certain extent. Therefore, it is necessary to closely track the progress of the release of new capacity and the operating rate of existing units in 2025. Meanwhile, players are recommended to pay attention to the potential influence of macroeconomic improvement on the demand for PP. In addition, given that the profitability of PP enterprises is still not optimistic, market competition will be more intense in the future, and unit fluctuations may be more frequent, so it is necessary to continue to study and judge the changes in the operating rate of PP units under various feedstock sources.
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