2020 China Propylene Supply-Demand Balance Analysis and Forecast
Supply: The capacity expansion was still the general trend, and the decrease in import volume was unexpected.
1. As of the end of June 2020, China’s propylene capacity was 40,550kt/a, up around 1,280kt/a or 3.26% Y-O-Y. The propylene output totaled 16,915.2kt from January to June, up 732.3kt or 4.53% Y-O-Y.
The main driver for the increase in propylene supply was the capacity expansion. Since 2020, the big ethylene units at Hengli Petrochemical (Dalian) and Zhejiang Petrochemical and the MTO unit at Jilin Connell Chemical have been successively put into operation, so the propylene capacity was continuously expanded. Although China’s propylene output from February to March declined Y-O-Y affected by the public health event, the overall output in H1, 2020 still grew.
2. It is predicted that the import volume of propylene will be around 1,080.4kt, down 196.5kt or 31.49% Y-O-Y.
There were many reasons for the decrease in import volume, including increasing maintenance of foreign propylene units, public health event, increasing domestic supply, decreasing output of some downstream products and so on. The decrease trend in import volume met the expectation, but the decrease range exceeded the expectation.
Demand: The capacity expansion and public health event synchronously affected the demand for propylene.
1. PP granule: China’s PP granule output was 1,993.1kt in June and 12,116.2kt in H1, 2020 (equivalent to the consumption of 12,116.2kt of propylene), up 1,234.7kt (equivalent to the consumption of 1,234.7kt of propylene) or 11.35% Y-O-Y.
2. PP powder: China’s PP powder output was 289.5kt in June and 1,623.1kt in H1, 2020 (equivalent to the consumption of 1,623.1kt of propylene), down 61.5kt (equivalent to the consumption of 61.5kt of propylene) or 3.65% Y-O-Y.
3. PO: China’s PO output was 207.9kt in June and 1,209.4kt in H1, 2020 (equivalent to the consumption of 1,028kt of propylene), down 191.8kt (equivalent to the consumption of 191.8kt of propylene) or 25.35% Y-O-Y.
4. Oxo-alcohols: China’s NBA output was 150.1kt in June and 872.2kt in H1, 2020 (equivalent to the consumption of 532kt of propylene), down 145.9kt (equivalent to the consumption of 89kt of propylene) or 14.33% Y-O-Y.
China’s 2-EH output was 183.3kt in June and 911.2kt in H1, 2020 (equivalent to the consumption of 637.8kt of propylene), down 181.5kt (equivalent to the consumption of 127.1kt of propylene) or 16.61% Y-O-Y.
5. Acrylonitrile: China’s acrylonitrile output was 164kt in June and 1,003kt in H1, 2020 (equivalent to the consumption of 1,053.2kt of propylene), up 52kt (equivalent to the consumption of 45.3kt of propylene) or 5.47% Y-O-Y.
From the perspective of the change in downstream demand, the PP granule output continuously and rapidly increased, and the demand for propylene also rose obviously. The expansion of PP granule capacity is still continuing, and it is basically integrated with the propylene capacity expansion. In addition, the acrylonitrile output also grew slightly, mainly supported by the commissioning of the phase II unit at Jiangsu Sailboat Petrochemical in H2, 2019.
As for other downstream products, such as PP powder, PO and oxo-alcohols, their output decreased significantly, and the demand for propylene also dropped. This was because there was no newly added capacity of them, and the public health event affected the operating rates.
On the whole, the total consumption volume of propylene from five major downstream industries was 16,990.3kt, up 819.9kt or 5.07% Y-O-Y.
Supply-demand balance analysis
In H1, 2020, China’s propylene supply grew by 732.3kt Y-O-Y supported by newly added capacity, but the import volume shrank 496.5kt. In addition, due to the synchronous capacity expansion of five major downstream product, the demand for propylene rose by near 819.9kt. Both the supply and demand in the propylene market increased, but the demand grew more than the supply, so the propylene market was still in short supply.
Q3, 2020 China propylene supply and demand forecast
In Q3, 2020, China’s propylene supply and demand will still increase synchronously.
1. The propylene supply will continue to mount up. Especially in Q3, the propylene capacity will expand intensively, and many PDH and steam cracking units will go into production. Therefore, the increase in propylene supply will accelerate, and the range will also widen.
2. The downstream demand growth will speed up. The downstream demand will expand synchronously, and the will continue to show integration with propylene, and the integration degree of propylene supply and demand will continue to improve. Besides PP granule, the newly added capacity of chemical downstream products such as acrylonitrile, phenol and acetone will also be released.
3. The supply will gradually grow faster than the demand, and the supply gap will narrow. In H2, 2020, there will be no matched downstream units with some newly added propylene units, so the market supply pressure will mount up.
4. The propylene industry pattern will continuously change, and diversification, integration and scale will still be the general trend. The diversification of feedstock sources and downstream demand, the integration of supply and demand and the large scale of units will be the general development trend of the propylene industry, upstream industries and downstream industries in the future, and will be the main path to enhance competitiveness.
