Q1, 2022 China PP Capacity Expansion Underway
Preface
China’s PP capacity continued increasing from 2017 to 2021, and capacity expansion was steadily propelled in Q1, 2022. On the one hand, the commissioning of new units brought increasing supply pressure on the PP industry. On the other hand, the capacity expansion will probably promote local producers to develop high-value products. Generally, the continuous growth of China’s domestic capacity will bring more opportunities and challenges to PP participants in the future.
According to the SCI, about 1,380kt/a PP units were put into production in the first quarter of 2022, and most of them have been operated steadily. Goods they produced flowed into the market, and they were acceptable for market buyers because new units were almost expanded from existing companies. As of now, China’s PP capacity totals 32,690kt/a. 2022 will witness an intensive release of capacity, which will bring risks of imbalance between supply and demand.
In terms of capacity layout, newly added capacity in Q1, 2022 was concentrated in East China, where capacity rose by 1,200kt/a or 2.72% from the end of 2021. Besides, North China and Northeast China also saw capacity expansion, but it had a limited impact on capacity regional occupation. As a whole, newly added capacity continued to be centralized in consumption regions.
From the perspective of PP unit types, SCI learns that crude oil-based PP is still the main force in new capacity. The proportion of crude oil-based PP units expanded by nearly 2% after the first quarter, involving new capacity of 1,200kt/a. The remaining 180kt/a of new capacity was from outsourced propylene-based PP units, enhancing the capacity proportion of outsourced propylene-based PP capacity slightly compared to the end of 2021. As the coal-based PP capacity increase slowed down in the past two years, coal-based PP capacity took up a smaller proportion, which is merely 21% now. Considering that the development of traditional coal chemical technology is relatively mature and the period of rapid expansion has passed, it is expected that coal-based PP capacity will account for decreasing proportion in the future.
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