PP Trade Flow Outlook with Capacity Release
Preface: China’s PP capacity will probably keep advancing from 2024 to 2028, and the projected new capacity may reach 13.005 million mt/a. Fresh capacity may be mainly concentrated in coastal regions such as North China, East China and South China, while that may be relatively limited in Northwest China, Northeast China and Central China. Accordingly, SCI predicts that PP supply will probably become ample gradually in North China, East China and South China with continuous capacity expansions. China’s domestic PP trade flow is expected to usher in a new pattern in the next few years.
Specifically, major changes in the domestic trade flows in the future are as follows:
1. PP goods in Northwest China will probably flow gradually into Central China and Southwest China. The regional competition will probably intensify with the continuous improvement in local supply capacity in the main consumption regions of North China, East China and South China. In the future, transportation costs will become an obstacle for long-distance producers in Northwest China and Northeast China to enter the coastal markets. According to the research of SCI, the transportation cost for one certain coal chemical enterprise in Northwest China to the Pearl River Delta is as high as 550-590 RMB. Under the high transportation cost, the advantage of resource allocation from Northwest China to North China, East China and South China is weakened. It is expected that in the future, goods in Northeast China may be delivered to Central China and Southwest China gradually in addition to satisfying the local demand.
2. The outflow of goods in Northeast China will be more flexible. The supply in Northeast China is rich. In addition to the local digestion in Northeast China, the goods also flow to the three major regions of North China, East China and South China. There are two major transportation modes, including road transportation and ocean transportation. In the future, a certain proportion of goods in Northeast China may flow into other regions, but those goods may mainly involve competitive resources such as high-MFR copolymer, transparent PP and thin-walled injection molding because the supply in North China, East China and South China may become gradually abundant.
3. The demand growth potential in Central China and Southwest China will probably continue to attract the inflow of resources in the future. Especially in the context of China’s development strategies such as accelerating the development of the western region in the new era and the Belt and Road, improving the layout of production bases in Southwest China and accelerating regional business expansion are one of the strategic development directions of manufacturing enterprises. According to multiple data in recent years, the home appliance industry, automobile industry, electronic information industry and clean energy industry in southwest China have developed rapidly, and the capacity has expanded rapidly. It is expected that the resource digestion of resources in North China will no longer be limited to Tianjin, Beijing, Hebei and Shandong, but will gradually shift to Henan and Wuhan. Central China and Southwest China will also become important inflow regions of Northwest China-origin resources such as coal chemical products.
4. In the future, various regions may gradually form a stable self-supply of local resources in the local and surrounding areas. For example, the trade flow of East China-origin resources may further penetrate into Anhui and Jiangxi, and that of Guangdong-origin resources may further penetrate into East Guangdong, Pearl River Delta and West Guangdong. Fujian-origin goods may further form a trade flow with Fujian as the center and with Jiangxi, southern Zhejiang, and Chaoshan as the radius.
5. In the future, it is worth paying special attention to the upgrading of China’s domestic product structure brought by the construction of foreign-invested and technology-based plants in China. That may further drive the new flow of high-end and special-purpose PP resources.
On the whole, China’s domestic PP trade flow will probably be subtly adjusted in the future, with the continuous growth of supply. The new trade flow may gradually arouse a new supply pattern in the regional market, which will further drive the PP market price change.
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