2020 China's propylene industry changes

Propylene is an important basic raw material product in China's chemical industry and an important monomer of synthetic resin materials. Its downstream products involve construction, automobiles, packaging, textiles and clothing and other fields. China's propylene industry chain is an important representative product in China's C3 industry chain and has been widely concerned by people in the industry.

Brother Pingtou saw that China's propylene industry has undergone substantial changes in 2020. The supply side has increased significantly, while the consumption side has increased substantially following the downstream. Coupled with the emergence of emergencies, the price of China's propylene market has brought rapid fluctuations. Influencing factors. In addition, the rapid expansion of the PDH industry has become a "star product" in the propylene industry chain.

1. The driving force behind the three-stage fluctuation of propylene in China

In summary, although China's propylene market price has risen sharply since mid-2020, the overall annual average has fallen year-on-year. According to Datayes data observed by Pingtou Ge, the average annual price of propylene in Shandong in 2019 was around 7,400 CNY/ton, and as of December 2020, the average annual price of propylene in Shandong was only around 6,700 CNY/ton, a year-on-year decrease of 9.45 %.

From the perspective of the price trend in 2020, the price of China's propylene market has experienced a three-stage fluctuation in 2020. One period is from January to April 2020. During this period, the price has dropped significantly, mainly due to the impact of the new crown epidemic, which has led to China's propylene. The logistics of all products in the industrial chain are blocked, including domestic logistics and export logistics. The blocked logistics leads to unsalable products, which leads to price drops. Another reason is that international crude oil prices have plummeted, leading to a sharp decline in the global chemical market.

The second stage of 2020 is the slow rise from April to October. Although the previous decline has been repaired to a certain extent, it is also due to the large decline in the previous period, resulting in the overall decline. The factors that caused the second-stage price increase were driven by the sharp rise in crude oil on the one hand, and on the other hand, due to the foreign epidemic, the demand for downstream products in the propylene industry chain has surged, which is transmitted upward through the latitude of the industry chain.

The third stage of 2020 is the rapid price increase from October to December, which is largely caused by the sharp increase in PO prices in the early stage, which is passed upward through the perspective of the industrial chain. On the other hand, as the end of the year is approaching, demand is strong, which has also accelerated the possibility of value transfer to the upstream through the terminal.

2. China's propylene production has seen substantial growth

According to statistics from related information companies, China’s propylene production in 2019 was about 33.12 million tons. However, due to the large number of new companies in China’s propylene industry in 2020, especially the large-scale production of PDH plants, China’s output in 2020 is expected to exceed 36 million tons/year, which is expected to increase by about 9% year-on-year.

According to incomplete statistics, there will be as many as 13 new propylene production enterprises in 2020, including steam cracking propylene production plants, PDH plants, catalytic cracking production propylene plants, MTO plants, etc., of which PDH plants are newly added; 4 sets , Respectively are Zhejiang Petrochemical, Zhejiang Huahong, Ningbo Fuji Petrochemical, and Zhongjing Petrochemical. These devices have greatly accelerated China's propylene supply.

In addition, due to the growth of China's propylene production, China's propylene imports are slowly shrinking. It is expected that China's propylene imports will be around 2.6 million tons in 2020, a year-on-year decrease of 17%. Brother Pingtou learned that the current propylene imported by China is still a downstream device that cannot be equipped with upstream and downstream resources. The newly-added propylene device is basically equipped with downstream or downstream devices around the company.

3. Demand has increased significantly year-on-year

According to relevant statistics, according to the calculation of China’s propylene production at 36 million tons in 2020, and the import volume at 2.6 million tons, it can be calculated that China’s apparent consumption of propylene in 2020 will be 38.6 million tons without export. An increase of about 6% year-on-year. The growth of China's propylene consumption also largely reflects the growth of China's chemical industry.

In terms of consumption structure, more than half of China's downstream propylene is the production of polypropylene. In 2020, China's polypropylene production will be about 25 million tons, which is estimated to account for 60.5% of propylene consumption. It is still the largest downstream consumer of propylene. Judging from the trend of consumption structure in the past few years, the proportion of propylene consumption in downstream polypropylene in China is showing a slow growth trend, while the consumption structure of other chemicals is showing a gradual shrinking trend.

4. China's propylene industry will continue to be hotly supplied and sold in 2021

From the supply side, China’s propylene will continue to show a trend of rapid growth in 2021. According to Pingtou Ge’s incomplete statistics, China will add more than 5 sets of propylene production plants in 2021, with a total production capacity of more than 3 million tons per year. The scale has increased to close to 50 million tons/year.

In addition, as China’s self-production of propylene continues to grow, China’s propylene imports will continue to shrink. It is estimated that China’s propylene imports will drop to about 2 million tons in 2021. A large part of China's imported propylene comes from the demand for propylene from old installations. There is no matching upstream of such installations. In addition, a part of it comes from the arbitrage demand for propylene imported from China.

For the consumer market, most of China's newly added propylene will support downstream equipment, and this will also be the case in 2021. Therefore, China's propylene self-sufficiency rate continues to show a trend of increasing year by year. Under this trend, the increase in the self-sufficiency rate of China's propylene supply chain will induce the advantages of the industrial chain, thereby driving the development of new enterprises. In addition, the competition in China's propylene market will gradually shift to competition in downstream products, and it is expected that the performance will become more obvious in 2021.