Which Categories of PP Face Changes in Supply Pattern?
Preface: In China, the adjustment of PP production structure was accelerated from 2019 to 2023 as capacity continued growing. Thin-wall injection molding, high-MFR fiber, high-MFR copolymer and transparent PP (TPP) witnessed the most rapid growth in capacity and output in the past five years, and their supply pattern varied gradually.
Since 2019, the PP industry has ushered in a new round of capacity expansion peak in China, with the rapid emergence of new refining and chemical integration enterprises represented by private refineries and the accelerated development of light ends projects. PP capacity continued to climb over the past five years, with an average growth rate of 11.67%. Therein, the capacity reached 38.89 million mt/a in 2023, an increase of 16.45 million mt/a or 73.31% compared with 2018.
With the substantial increase in capacity, general-purpose PP capacity became gradually surplus, and the product structure was adjusted more rapidly. Over the past five years, newly added capacity was mainly embodied in thin-wall injection molding, high-MFR fiber, as well as high-MFR copolymer and TPP with relatively high import dependence degree, so the output of those four categories maintained a high growth rate. According to SCI, the average growth rates of thin-wall injection molding, high-MFR fiber, high-MFR copolymer and TPP output reached 23%, 22%, 14% and 14% respectively, all higher than that of PP output, namely 9.09%.
Thin-Wall Injection:
The growth rate of thin-wall injection molding capacity stays high, but that of output has slowed down noticeably. Thin-wall injection molding has been a kind of PP with the fastest growth in capacity and output over the past five years. The proportion of thin-wall injection molding in PP output has increased from 3.87% in 2019 to 6.37% in 2019, ranking fifth among the 13 categories of PP.
The growth of thin-wall injection molding supply is closely related to the development of takeaway industry. The period from 2008 to 2016 was the embryonic development era of takeaway industry. The scale of China’s takeaway market reached 400 billion RMB from 2017 to 2018, and the demand for takeaway food containers was increasing day by day. As the main feedstock for take-out food containers, thin-wall injection molding has been favored by producers in China since 2017, and its new capacity has increased year by year.
Since 2019, the takeaway platform has ushered in a period of refined operation, and the demand for lunch boxes has continued to grow. The social value of takeaway lunch boxes in the special period from 2020 to 2021 has been highlighted. The scale of the takeaway market continues to expand, which in turn drives the demand for lunch boxes and continues to promote the consumption of thin-wall injection molding. Therefore, the years from 2019 to 2023 are periods that witness rapid growth for new entry enterprises of thin-wall injection molding, during which the average growth rate of capacity reached 33.85%. Among them, 2020 is the year with the most capacity release, and the Y-O-Y growth rate of 56.79%. From 2021 to 2023, the newly added capacity will continue to maintain a high growth rate of more than 30%. By 2023, the capacity of thin-wall injection molding has reached 15.09 million mt, accounting for 38.80% of the total PP capacity in China.
In terms of changes in the actual output of thin-wall injection molding in the past five years, the output increased steadily from 2019 to 2022, and the growth rate also continued to increase. The growth rate of output in 2022 was as high as 35.2%. However, the continuous rapid growth of output contributed to more abundant supply of thin-wall injection molding and the imbalance between supply and demand was frequently seen. Therefore, the output of thin-wall injection molding began to decline notably from 2023. From January to June 2024, the output continued to slide, registering a Y-O-Y decrease of 4.4%. It is expected that the thin-wall injection molding supply may enter a more plentiful stage. Although the newly built capacity keeps climbing, the output growth rate may enter a flat period in the future.
High-MFR PP Fiber:
Most of the high-MFR fiber capacity that has entered in the special period temporarily withdrew from the production of high-MFR fiber material.
High-MFR fiber materials are mainly used in the fields of sanitary materials and medical materials. In 2020, due to the special public conditions, the market demand for high-MFR fiber materials grew rapidly. At the same time, the considerable consumption of PP fiber under special circumstances also stimulated domestic petrochemical enterprises to actively enter the field of high-MFR fibers. Therefore, 2020 is the fastest growing year for new capacity of high-MFR fiber, in which that capacity once increased from about 5 million mt in 2019 to nearly 28 million mt in 2020, with a growth rate of 450%. The number of high-MFR enterprises accounted for 60% of the total number of PP enterprises. However, the capacity experienced a plunge after 2021. According to data monitoring, the mainstream capacity of high-MFR fiber was only 11-14 million mt/a from 2021 to 2023.
Judging from the change in output in the past five years, it is very similar to the changes in capacity. In 2020, due to the substantial increase in newly built capacity, the actual output of high-MFR fiber increased significantly, reaching 2.4649 million tons during the year, an increase of 140% from 2019. After entering 2021, the output has declined, with a growth rate from -4.6% to 6.82%. On the one hand, some producers that had previously produced high-MFR fiber materials suspended the production of high-MFR fiber materials temporarily. On the other hand, the inventory of finished products was abundant, but downstream and end enterprises were still in the process of destocking and showed softer demand for high-MFR fiber. In conclusion, the output of high-MFR fiber materials will be basically maintained at 1.8-2 million mt/a from 2021 to 2023. There are limited hot spots in high-MFR fiber consumption at present. It is expected that the short-term consumption may not improve noticeably, and the output may still maintain a slow growth rate.
High-MFR PP Copolymer:
In China, High-MFR PP copolymer capacity ushered in a new round release in 2021, and its output climbed in 2022 and maintained high growth rate in 2023.
The supply growth of high-MFR PP copolymer was mainly stemmed from the continuous advancement in consumption from home appliance and automobile fields. However, high-MFR copolymer was mainly produced by Sinopec, PetroChina and some joint ventures before 2019 because of the technical difficulties. Since 2019, the capacity of high-MFR PP copolymer has expanded rapidly with continuous increase of newly added PP enterprises, especially private refining and chemical enterprises. Therein, 2021 witnessed the most newly added high-MFR copolymer enterprises, such as Zhejiang Petroleum & Chemical, Liaoning Bora Petrochemical, Wanhua Chemical Group and Shandong Dongming Petrochemical. In 2021, high-MFR copolymer capacity reached 10,180kt/a, up 51.26% from 2020 and up 86.45% from 2019. After the intensive entry of key local refining and chemical enterprises, the growth rate of new capacity entering the field of high-MFR copolymer slowed down significantly from 2022 to 2023.
Judging from the changes in high-MFR copolymer output in the past five years, the output is basically consistent with the capacity trend from 2019 to 2022. Among them, output grew rapidly from 2019 to 2021, and the growth rate slide to about 5.3% in 2022 after reaching a relatively high level. However, although the growth rate of newly added capacity was not high in 2023, that of output has achieved a high of 20.5%, which also reflects the relatively strong demand for high-MFR copolymer. In the future, output of high-MFR copolymer is supposed to increase at a quick rate with the continuous growth of demand for home appliances and automobile industries.
TPP:
In 2023, China’s transparent PP (TPP) capacity saw the highest growth rate and broke through 15 million mt/a.
As a pioneer of high-end polypropylene (PP) products, transparent PP (TPP) has been favored by many new entrants in recent years due to the increasing market share and favorable economic benefits. In addition, the continuous breakthrough of production technology contributed to further growth of TPP capacity, and the annual average growth rate of capacity touched 24% from 2019 to 2023. In terms of trend, the TPP capacity growth rate also increased year by year over the past five years, among which, 2023 is the year with the most considerable fresh capacity. The growth rate of TPP capacity reached 39.87% in 2023, up 174.91% from 2019. Meanwhile, the number of TPP producers reached 49 in 2023, rising by 15 Y-O-Y. That suggests that the number of producers that can produce TPP materials has exceeded 50%.
With continuous acceleration of the startup of new capacity, the output of TPP materials has also shown a rapid growth trend, with an average growth rate of 14.41% over the past five years. Among them, the output grew by 17.96% YOY to 16.26 million mt in 2023, leading to more abundant supply of TPP in China. Therefore, some imported TPP cargoes were replaced. In 2024, the high price of TPP slid quickly with plentiful supply. It is predicted that PP import volume may decrease gradually in the next two years with the domestic price falling in China. Besides, TPP takes up a small proportion of the total demand for high-end materials, and the demand for high-end materials is advancing at present. PP producers may also continue developing and upgrading production technology, so TPP supply is expected to keep growing in the future.
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