The Global PP, LLDPE, And HPPE Producers Are Expecting Margin Pressure Owing To China's Rising Capacity In Ethylene And Propylene Derivatives
The Global PP, LLDPE, And HPPE Producers Are Expecting Margin Pressure Owing To China's Rising Capacity In Ethylene And Propylene Derivatives
China is continuously looking to expand domestic petrochemical projects in order to meet the rising consumer and industrial demand. Furthermore, China is also prioritising reducing its dependence on foreign imports and subsequently achieving self-sufficiency in petrochemicals.
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A staggering 8 million tons of capacity is likely to be further added throughout the year. In February, China already reached 18% of the aforementioned capacity as a result of the startup of PetroChina Guangdong's PP plant and Sinopec Hainan's multiple PP plants.
Other major producers, such as Guangxi Hongyi, Dongguan Grand Resource, Shandong Chambroad, and Huating Mei Ye, are preparing to commence operations following the first quarter of the year.
Unfortunately, the rapid capacity expansion comes amidst a period with lower-than-expected demand. The demand recovery following the easing of COVID-19 restrictions across China has been short-lived. Moreover, the anticipated 5% conservative GDP growth forecast has dampened the region's expectations. Meanwhile, Chinese producers are enforcing run rate cuts to curb the influx of new capacity.
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China is positioned to lead the petrochemical project startups in Asia as the country is expected to commence operations of 410 petrochemical projects in the 2023 - 2027 time period.
Polypropylene projects lead among the 410 projects expected to begin operations in China, with 48 closely followed by 42 propylene projects.
The trend of supply cuts is anticipated to continue in the upcoming months, with more capacity expected to come online.
According to the article by Procurement Resource, during 2023-2027, China will be heading 410 petrochemical projects for fulfilling consumer demand and lowering reliance on foreign imports. However, these expansions, paired with lower-than-expected demand, will cause stress on margins and a struggle for players to hold a market share.
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