Downstream demand in the domestic polypropylene market weakens

The new crown epidemic has spread globally, the demand for masks has surged, and the short-term market chaos has caused the price of upstream polypropylene to fluctuate in a short period of time. Less than 1%. Therefore, China's demand will not have a big impact on the polypropylene market.

Throughout the year, due to multiple factors such as the Sino-US trade dispute, geopolitical tensions and the new crown epidemic, the global economic recession has further weakened the downstream demand support of the polypropylene market, and the cost end has been affected by the plunge in crude oil prices. The polypropylene market prices will be low Shock.

Demand growth rate declines slowly

Wire drawing and injection plastics account for a considerable proportion of polypropylene products in China, accounting for 37% and 27%, film and sheet materials account for about 24%, fiber materials account for about 8%, and tube materials account for about 4%. In the future, with the increase of consumption base and the slowdown of economic growth rate, China's polypropylene demand growth rate will show a gradual decline.

PP wire drawing material: mainly used for outer packaging of woven products, cement, chemical industry, grain, feed, construction materials and other fields, of which the amount of cement bags is the largest. With the increasingly stringent environmental protection policies and regulations such as plastic restrictions, the demand for cement, building material packaging, disposable plastic straws, toothbrushes, etc. will decline, and the proportion of wire drawing materials in the PP consumption structure will continue to decrease.

PP injection plastic: mainly used for small household appliances, daily necessities, washing machines, toys, automobiles and totes. Although the demand for all kinds of small household appliances has grown rapidly due to the rise of online e-commerce and the improvement of people's living standards, the growth rate of PP injection plastics has generally slowed down due to the decline in car sales growth and the tightening of real estate policies.

PP film material: mainly used for food packaging, according to processing technology, it can be divided into BOPP film, CPP film and IPP film, of which BOPP film is the most used, but the proportion of BOPP has declined due to the replacement of relatively low-priced wire drawing materials; CPP special The proportion of materials has increased, so the overall proportion of PP film materials is stable.

PP fiber: mainly used in the fields of decoration, clothing, health care, etc. With the implementation of the second child policy and the intensification of China's aging population, especially the new coronary pneumonia epidemic since the beginning of the year, downstream wipes, diapers and masks Demand for sanitary protection supplies has surged, and there is a shortage of domestic fiber materials.

PP pipe material: mainly used in water supply and heating systems, etc. It has the advantages of light weight, convenient transportation, good environmental performance, and recyclability. With the progress of urbanization and the northernization of winter heating in the south, the demand for pipe materials has been increasing.

High-end products still need to be imported in large quantities

In 2019, China imported 3.491 million tons of primary-shaped polypropylene (homopolymerized PP), 1.555 million tons of ethylene-propylene polymer (co-polymerized PP), and 182,000 tons of other primary-shaped propylene copolymers, with a total import volume of 5.223 million tons, mainly From South Korea, Singapore, Taiwan, Thailand, Japan and other Asia-Pacific regions and the Middle East.

In recent years, with the release of new polypropylene production capacity in China and the strength of local polypropylene production enterprises, exports have shown a rapid upward trend, reaching 406,000 tons in 2019, an increase of 13.8% year-on-year, mainly exported to neighboring regions such as Vietnam. Actively opening up export channels will become an effective way to alleviate the contradiction between supply and demand in the domestic polypropylene industry in the future.

From the perspective of import categories, the import volume of homopolypropylene still accounts for the largest proportion, showing a general downward trend. However, in recent years, China has banned the import of "foreign garbage" from abroad, which has led to a slight increase in the import volume of new materials.

The proportion of copolymerized PP is relatively small, but it is on the rise, and the average price is higher than the average price of imported homopolymerized PP and the overall average price of imported polypropylene.

China's polypropylene import receipts are mainly concentrated in the southeastern coastal areas, accounting for about 90% of the country's total imports, of which Guangdong's PP imports have ranked first in the country for many years. In 2019, the imports were 1.798 million tons, accounting for the total imports 34.4%; Zhejiang Province ranks second, accounting for 23.7% of total imports.

This is mainly because the southeast coastal area has concentrated most of China's PP processing enterprises and downstream users. Among them, the demand for PP in East China accounted for 35.6% of China's total demand, ranking first in the country; followed by South China, accounting for about 30%.

Market prices will fluctuate in low rate

Since the current route of naphtha cracking to produce propylene is still the main source of polypropylene raw materials in the world and the main supplier of polypropylene in China, the price of polypropylene products is closely related to the price of naphtha and crude oil. Oil price and supply and demand are the main factors affecting the price of polypropylene.

Overall, in 2019, China's polypropylene prices are under pressure. On the supply level, the large-scale new production capacity at home and abroad is expected to be put into production, resulting in continued pressure on the supply side; on the demand side, affected by the slowdown in economic growth, the downstream demand side has not increased as much as expected. Both supply and demand levels have caused polypropylene prices to continue to fall .

The spread of the new coronary pneumonia epidemic since early 2020 has worsened the global economy. The downstream demand support has further weakened. The cost end has been affected by the rapid decline in crude oil prices. Product prices have continued to fluctuate at low levels.

High-end differentiation is the development direction

In recent years, China's polypropylene industry has done a lot of work on capacity expansion and new product development. The overall level has been significantly improved, and the product self-sufficiency rate has reached 83%.

In the future, as new projects are put into production, the source of raw materials and market competition will become more diversified, and production capacity and strength will increase rapidly. It is expected that China's polypropylene production capacity will exceed 35 million tons per year by 2023. On the demand side, as the consumption base increases and the economic growth rate slows down, China's polypropylene demand growth rate will show a downward trend.

Therefore, in addition to the irreplaceable high-end products, the market will gradually show a balance between supply and demand and even local oversupply. At that time, market competition will become more intense, high-end, functional and differentiated product performance and product quality will be stabilized and sales methods Digitalization and diversification of export channels will be the development direction of the polypropylene industry.