Polypropylene, a thermoplastic resin made from propylene polymerization, can be used in many fields. This product is a large product of 20 million tons, and it has more financial properties. What is the supply and demand pattern of polypropylene? What is its sales model? The following will explain for you.
1、 Polypropylene supply pattern is stable and dynamic, and Northeast Asia has the largest production capacity
Overall, the global polypropylene supply pattern is stable and dynamic. Northeast Asia, led by China, is still the leader. It is still possible to expand production in North America and India. North America is driven by shale gas, while India is driven by population growth. The rest of the world is constrained by resource shortage, capacity saturation, demand constraints and other factors, with little intention of capacity expansion.
Figure 1 Distribution of global polypropylene supply in 2016
- Analysis on the distribution pattern of polypropylene production capacity in China
In 2016, China’s total polypropylene production capacity was about 20 million tons / year. The coal chemical industry enterprises in Northwest China are expanding rapidly, ranking first in all major areas of China. However, coal chemical enterprises have entered the Bureau for a short time, and they are fighting their own battles. They are far behind the oil enterprises in market influence and cannot shake the market leading position of the oil enterprises in a short time.
Figure 2 regional distribution of China’s polypropylene production capacity in 2016
The total capacity of polypropylene in Northwest China accounts for 28% of the total capacity of the country, mainly coal chemical and PetroChina enterprises, mainly distributed in Ningxia, Shaanxi, Xinjiang, Gansu and other provinces.
North China ranks the second, accounting for 19%, dominated by Sinopec and coal chemical enterprises, mainly distributed in Beijing, Tianjin, Hebei, Inner Mongolia and other provinces.
East China ranks third, mainly SINOPEC enterprises, and most of the private enterprises are concentrated in the region, mainly in Jiangsu, Zhejiang and Shanghai. In the future, the PP capacity growth in East China will mainly come from PDH, outsourcing methanol to olefin and other types of enterprises.
South China is dominated by SINOPEC enterprises, mainly distributed in Guangdong, Guangxi and other provinces, with slow growth of production capacity in the future.
Northeast China is dominated by PetroChina enterprises, mainly distributed in Liaoning, Heilongjiang and other provinces.
Central China is mainly SINOPEC enterprises, concentrated in Henan, Hubei and other provinces.
There is only one PP plant in Southwest China, which is Sichuan Petrochemical Company located in Pengzhou, with an annual capacity of 450000 tons.
China’s polypropylene production enterprises are mainly Sinopec, coal chemical industry and PetroChina, which are in a tripartite situation. Sinopec and PetroChina respectively implement the marketing control policy, and they occupy half of the polypropylene market, so the market discourse is in the hands of “two barrels of oil”. Each coal chemical enterprise sells its own products. There is little difference in product quality and use between enterprises. Coal chemical enterprises have a weak voice in the market. The price adjustment is mainly to follow the “two barrels of oil”.
Figure 3 proportion of capacity of different types of polypropylene enterprises in 2016
- Analysis on the source of polypropylene raw materials in China
In recent years, China’s polypropylene raw material propylene sources are increasingly diversified. At present, it is divided into the following categories: oil, coal, outsourcing methanol, outsourcing propylene, PDH, mainly oil and coal.
Figure 4 proportion of polypropylene raw materials in China in 2016
Oil PP has always occupied a major position in the Chinese market, accounting for about 60% of the total production capacity, mainly Sinopec and PetroChina enterprises. However, there are few new units for oil-based PP, and coal chemical industry and PDH are growing rapidly. Coal to PP is the fastest growing polypropylene at present, accounting for 21% in 2016. In the next few years, coal will still account for the majority of the new capacity of polypropylene.
PDH (propane dehydrogenation to propylene) is a new source of propylene in China. The first one is the successful start-up of Shaoxing Sanjin project in 2014, and the successful production of Donghua energy Yangzijiang petrochemical in 2015. Although the propylene source of PDH only accounts for 5% of the total PP capacity, it may be favored in the future.
The proportion of purchased methanol and purchased propylene to produce PP is small. The price of propylene and methanol fluctuates frequently in recent years, and the price is on the high side, which leads to the decrease of profit level of these enterprises, and the growth rate will not be too fast in the next few years.
- Analysis on the supply pattern of polypropylene in China in the future
According to the new capacity, the growth rate of China’s polypropylene capacity is still high in the next few years. The annual growth rate is expected to be 6.6% in 2017-2020, and the average growth rate of production is 7.8%. The market may experience a rebalancing process.
Figure 5 prediction of China’s polypropylene capacity, production and operating rate in 2017-2020
Table 1 capacity expansion plan of China’s polypropylene plant in 2017-2020 (unit: 10000 tons / year)
In 2017-2020, the expansion speed of domestic polypropylene industry was significantly accelerated, and the new capacity in 2017 doubled compared with 2016; in 2018, the new capacity was 1.95 million tons / year, and in 2019-2020, the new capacity was 2.9 million tons / year. Most of the new units are made of coal and propane. In the future, the pattern of polypropylene industry will undergo profound changes.
In 2017-2020, the new capacity expansion shows the following characteristics: first, due to the constraints of project progress, production technology, upstream and downstream supporting facilities, device failure, etc., the production delay of the device is still normalized; second, the capacity of a single device is large-scale, except for the capacity of Yuntianhua 150000 t / A, all the devices are more than 300000 t / A; third, coal to propylene is still the main force of capacity expansion, PDH continues to grow, and traditional oil The proportion of olefin production will continue to decline; fourthly, the producers will continue to move to the central and western regions, and the raw material production and consumption areas will become far away, and the transportation of polypropylene raw materials will be highlighted in the future.
2、 The global demand pattern of polypropylene is stable, while domestic demand is still dominated by wire drawing and injection molding
In 2016, the global demand pattern for polypropylene was stable, with injection molding accounting for 33%, ranking first; film packaging accounting for 24%, ranking second; drawing mainly with plastic braiding accounting for 19%, ranking third, with digestion areas in China, Africa, Turkey and other places.
Figure 6 global polypropylene demand pattern in 2016
In the domestic market, brushed ranks first, accounting for 34%, but the link ratio of this proportion has declined significantly. Sinopec and PetroChina have less wire drawing production. At present, wire drawing mainly comes from coal chemical enterprises. After stable production, coal chemical enterprises are also trying to produce injection molding, fiber and other products, such as shenhuaning coal, Yanchang Yulin, Zhongmei Yulin, Ningxia Baofeng, Pucheng clean energy, etc. In the future, brushed will maintain a high proportion, but will hardly grow again. The domestic demand structure will continue to develop towards the global structure.
Figure 7 demand pattern of polypropylene in China in 2016
3、 The sales model of polypropylene in China will be more diversified
At present, the mainstream sales mode of domestic polypropylene industry is still the traditional offline sales, but with the increase of production enterprises, especially the increase of local enterprises and coal-based polypropylene enterprises, the sales mode is more and more diversified.
Figure 8 change of sales mode of polypropylene in China from 2015 to 2016
The electronic trading sales mode caters to the development trend of the Internet, improves the convenience and participation of procurement, and expands the sales channels. However, there are many problems, such as malicious bidding, insufficient customer resources, which cause the flow bidding and the decline market difficult to maximize profits. At present, the trading platform is still lack of successful cases for reference, and there is some uncertainty in the future development.
For example, Shenhua Group, through its own platform “Shenhua coal trading network”, adopts the mode of online auction and online listing sales. The average daily trading volume of polypropylene is about 5000 tons, which has become the benchmark of online bidding in the industry. Shenhua Group, including Shenhua Baotou, Shenhua Yulin, Shenhua Ningmei and Shenhua Xinjiang, has a total capacity of 1.55 million tons / year. The success of its bidding model is difficult to be copied. Shenhua’s product structure is relatively single, except Shenhua Ningmei, all other general materials are produced. Shenhua has invested a lot of money in the construction of non local warehouses. Fire transportation, automobile transportation and ship transportation can be combined reasonably and the transportation is convenient. Shenhua has fully considered the customer experience, which can give customers more freedom.
Yan’an refinery and Yanchang Zhongmei adopt the sales mode of combination of online auction and agent distribution. At present, offline trading volume accounts for more than half.
The price point model is mainly applied in the middle and lower reaches of industries, which can avoid risks. For traders, they can change the mode of hoarding and gambling, reduce the capital pressure, avoid the risk of price fluctuation, and earn reasonable profits; for downstream factories, they can lock the profits in advance, reduce the capital pressure, and focus on production and sales.
At present, more than 90% of domestic polypropylene manufacturers adopt the traditional offline sales mode, and only about 5% of Sinopec’s products are sold on the website of the channel petrochemical products trading center; Sinopec South China has opened stores in Alibaba to display products, but no sales have been generated; about 5% of Sinopec East China’s products are traded on the Shanghai chemical exchange electronic disk; Sinopec North China attempts to establish CRM electronic disk Supermarkets, but it is still difficult to change the offline sales LED sales pattern.
Table 2 summary of sales mode of Chinese polypropylene production enterprises (unit: 10000 tons / year)
At present, there are some conclusions as follows:
-In the future, traditional distribution and direct sales will still be the two most important sales models.
-The financial derivatives represented by point price transaction and the rapid development of e-commerce platform will erode the market share of traditional trading enterprises. In addition, manufacturers pay more attention to the direct selling rate, which will make the traditional trade enterprises more difficult.
-The development of e-commerce platform has a certain integration effect on the industry, but whether this effect can be sustained is still unclear.
-The traditional way of trading enterprises using financial derivatives and the combination of futures and cash will become normal. It is more and more difficult to rely on spot trading.
-The competition of most polypropylene downstream industries (such as plastic knitting, BOPP film, etc.) is increasing. It is more and more common for downstream factories to reduce the cost of raw material procurement by using financial instruments such as point price transaction and period cash combination, which has become one of the most important ways for enterprises to increase profits.
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