PP supply and demand imbalance

Facing the situation of increasing PP capacity expansion, the domestic PP downstream demand growth rate is worrying market participants. The diversification of domestic PP raw materials has once again upgraded the market competition pattern. Downstream demand is changing in layers, and general products, especially plastic weaving, have seen their profits shrink, while high-end plastic products still have strong demand potential due to demand!

I. Analysis of the demand for plastic products

From the analysis of 2010-2020 production data of plastic products, it was found that the growth rate of domestic plastic products showed a gradual slowdown, especially after experiencing a high in 2014, the overall growth rate of plastic products showed a declining trend. The main reason for the rapid decline of plastic products is due to strict investigation of domestic environmental protection, and at the same time, the number of processing companies has decreased due to the impact of the Sino-US trade war. After 2019, the growth rate of plastic products has slowed again, mainly due to the weak global economic growth and the lack of follow-up of orders from downstream product companies under the impact of the domestic economic environment on the overall production of plastic products.

II. The upgrade of the diversified competition pattern of raw materials

A comparative analysis of PP raw material capacity from 2016 to 2019 found that the coal-to-olefins capacity increased fastest, from 3.36 million tons in 2016 to 6.33 million tons in 2019, an increase of 2.97 million tons. Among them, coal-to-olefins production capacity accounted for 18% in 2016, which reaches 26% in 2019, an increase of 8%. The growth rate was surprising. In addition, the PDH series is also a fast-growing product. Due to the obvious cost advantage of propane dehydrogenation products, new capacity expansion products will also present new breakthroughs. The diversification of raw materials and the pressure of market competition will gradually escalate.

III. Import dependence has been declining

2019 PP import dependence showed a weak and volatile situation. From January to October 2019, the total import volume was 20.9919 million, which was 1.4032 million, an increase of 7.16% from January to October 2018 (total 19.587 million). Due to strict domestic environmental protection investigation and strict prohibition of imported waste plastics, the domestic demand for PP raw materials has increased accordingly, and some imported resources have been increased accordingly to fill domestic demand. However, the overall dependency of PP imports has gradually decreased. At present, the average import dependency of 2019 is 19.63%. It can be seen that with the continuous increase in domestic production capacity, some domestic materials have gradually replaced imported products, and import dependency has also decreased accordingly.

IV. Domestic supply and demand game import dependence still exists

Facing the rapid expansion of domestic PP, the imbalance between supply and demand in the market has gradually become apparent. Although domestic general-purpose products have gradually replaced imported products, the domestic market demand for high-end products is still strong, especially the domestic infrastructure and second-child policies are gradually liberalized. The market has huge potential for impact products and the medical industry. There is still much room for development.