China's polypropylene is at the peak of a new round of capacity expansion, with an average growth rate of 11.7 per cent in the past five years. As of May 2024, China's polypropylene production capacity has reached 40 million tons/year, an increase of 77.2 compared to 2018. In the context of the slowdown in domestic demand for polypropylene, the contradiction of excess supply has gradually become prominent. The export of polypropylene is an important way to alleviate the contradiction between domestic supply and demand and ensure corporate profits. Domestic production and trading companies actively explore the layout to accelerate export growth. In the future, exports are expected to continue to expand as polypropylene production capacity continues to expand and domestic competition intensifies. So, where is the export destination? This paper makes an analysis.

From a global perspective, from 2019 to 2023, the global polypropylene (PP) industry developed rapidly, with an additional capacity of 23.65 million tons/year.

In 2023, global PP production capacity was 107.89 million tons/year, an increase of 7.17 million tons/year or 7.1 percent over the previous year; production was 88.73 million tons, an increase of 4.56 million tons or 5.4 percent over the previous year; consumption was 86.6 million tons, an increase of 3.58 million tons or 4.3 percent over the previous year, and the growth rate of consumption was 1.9 percentage points higher than that in 2022. Although the growth rate of consumption is lower than the growth rate of production capacity and output, it is significantly higher than the growth rate in 2022, indicating that the global economy is improving after the epidemic, and consumption in services such as catering and tourism has increased significantly, driving PP consumption.

In addition to Northeast Asia is a hot land of production capacity and consumption, in recent years, with the fifth industrial transfer, Southeast Asia and South Asia have attracted more and more attention, and the demand potential of polypropylene in the future is huge. In addition, the demand for polypropylene in Africa and South America has gradually increased in recent years. With the gradual overcapacity of polypropylene in Northeast Asia, exports to these regions will be the main choice in the future.

Export Targets Four Major Markets

The export direction of polypropylene is diversified, mainly covering Asia, Europe, Africa, America and other regions. Among the many export destinations, we need to focus on the four major markets of Southeast Asia, South Asia, Africa and South America.

In the Asian market, Southeast Asian countries such as Thailand, Vietnam, Indonesia, etc. have become an important destination for my country's polypropylene exports due to their rapid economic development and continuous improvement of infrastructure construction.

In South Asia, such as India and Bangladesh, the demand for polypropylene is increasing due to rapid economic development and large population. This provides a broad market space for China's polypropylene exports.

As a region with rapid economic development, the demand for polypropylene in infrastructure construction, manufacturing and agriculture is increasing. In addition, China also maintains close economic and trade cooperation with the African region, providing a good trade environment and policy support for the export of polypropylene.

South America is an important direction of China's polypropylene export in recent years. As an emerging market in South America, infrastructure construction, manufacturing development and consumption upgrading in some countries have increased the demand for polypropylene products.

Southeast Asia Market

Southeast Asia is one of the important production and consumption regions of PP in the world. In 2023, Southeast Asia has a PP production capacity of nearly 8.72 million tons/year, an output of 5.91 million tons, a consumption of about 6.3 million tons, an import volume of about 4.3 million tons and an export volume of about 3.92 million tons. Southeast Asia is the import place of PP, with a net import volume of about 380000 tons.

PP supply in Southeast Asia is mainly concentrated in Thailand, Malaysia, Vietnam, Singapore and Indonesia, accounting for 29%, 18%, 18%, 17% and 11% of total PP capacity in Southeast Asia, respectively, totaling 93%.

PP consumption in Southeast Asia is mainly concentrated in Indonesia, Vietnam and Thailand, accounting for 30%, 27% and 19% respectively, totaling 76%.

PP consumption in Southeast Asia is dominated by diaphragm, accounting for 35% of its total consumption; followed by wire drawing and injection molding, accounting for 31% and 23% respectively.

In the next few years, Southeast Asia will usher in a wave of capacity expansion climax, and the new production capacity is expected to exceed 1.6 million tons/year from 2024 to 2030. In 2030, the gap between supply and demand of PP in the region will be about 1.7 million tons.

In the future, the application of PP in the field of woven products in Southeast Asia will grow faster than other areas, and the proportion of its consumption structure will be increasing, while the proportion of other areas will be declining or stable.

The main reason for the substantial increase in polypropylene consumption in Southeast Asia is that it is undergoing the fifth industrial transfer of human industry, that is, the transfer from mainland China to Southeast Asia and South Asia. The pursuit of comparative advantage is the main driving force of industrial transfer, mainly due to the change of comparative advantage of market, cost, technology, policy, natural resources and other factor endowments, which leads to industrial transfer. Southeast Asia has a population of nearly 0.7 billion, 50% of whom are under the age of 30, and the Internet penetration rate is 75%. According to the joint report of Google, Bain and Temasek, if Southeast Asia is regarded as a whole, it may become the fourth largest economy in the world by 2030.

However, there are some differences in the transfer drivers of different industries. Labor-intensive industries such as light industry and textile are more sensitive to the cost of low-end factors such as labor; resource-and energy-intensive industries such as mining and metallurgy tend to transfer to areas rich in energy resources; regional collaborative industries such as electronic information tend to transfer to advantageous areas with a certain industrial base; market-oriented industries such as automobile manufacturing tend to transfer to areas with high market demand due to high transportation costs and obvious production characteristics close to market demand. In recent years, the comparative advantages of traditional factors such as labor and land in China have been declining, and some industries and links no longer have comparative advantages in the world. Labor-intensive industries represented by textile and clothing, shoes and boots, travel bags, electronic communication components assembly, and resource-intensive industrial chains represented by food and beverage, raw materials, mineral fuels, etc., show a strong trend of relocation, which is an inevitable trend and a normal phenomenon. This trend has greatly increased the demand for local polypropylene.

South Asian Market

South Asia is one of the important production and consumption regions of PP in the world. In 2023, South Asia has a PP production capacity of nearly 6.36 million tons/year, an output of 5.6 million tons and a consumption of about 8.12 million tons. South Asia is the input place of PP, with a net import of about 2.52 million tons.

PP supply in South Asia is mainly concentrated in India, accounting for 100 per cent of total PP capacity in South Asia. PP consumption in South Asia is mainly concentrated in India, Pakistan and Bangladesh, accounting for 85%, 8% and 5% respectively, totaling 98%. PP consumption in South Asia is dominated by wire drawing, accounting for 37% of its total consumption. The second is injection molding and film, accounting for 31% and 20% respectively.

In the next few years, South Asia will usher in a wave of capacity expansion climax. It is estimated that the new production capacity will exceed 3.37 million tons/year from 2024 to 2030, and the expansion will mainly come from India. In 2030, the gap between supply and demand of PP in the region will be about 4.27 million tons.

In the future, the proportion of PP in South Asia in the field of wire-drawing consumption decreased, the proportion of the film field increased, and the proportion of other areas showed a stable trend.

The rapid increase in polypropylene consumption in South Asia is closely related to the rapid development of India. India is already the world's fifth-largest economy, growing at 7.7 per cent in 2023. Like China's rapid development in recent years, India's rapid development has three major advantages. First, there is a large young population, so the consumption power is prosperous and the labor force is abundant. Its average age is only 27 years old, which is 10 years less than the average age of our country, and the per capita wage is only 1/4 of that of our country, which is very suitable for the development of labor-intensive industries. The second is the rapid advancement of urbanization. In 1950, India's urbanization rate was 17%, and the current urbanization rate in India is 32.8. The urbanization rate will continue to increase in the future. Urbanization will drive at least 60 industries forward. Greatly stimulate the consumption of polypropylene film, wire drawing, and injection molding products. Third, the scale advantage of industrialization is gradually emerging. At present, India's Internet penetration rate is 50%, and smartphone shipments will reach 0.15 billion units in 2023. The Indian unicorn company ranks third in the world and is the world's fourth largest automobile manufacturing base. It also has a $500 billion food technology and processing market and a $400 billion pharmaceutical market. The huge industrial base will greatly boost PP consumption.

The African Market

Africa is one of the more active PP consumption regions in recent years. In 2023, Africa's PP production capacity is nearly 1.48 million tons/year, the output is 1.14 million tons, and the consumption is about 2.31 million tons. Africa is the PP import place, with a net import of about 1.17 million tons.

Africa's PP supply is concentrated in South Africa, Egypt and Nigeria, accounting for 51%, 40% and 9% respectively, totaling 100.

PP consumption in Africa is mainly concentrated in Egypt, South Africa and Nigeria, accounting for 23%, 17% and 15% of total PP capacity in Africa, respectively, totaling 55%.

PP consumption in Africa is dominated by wire drawing, accounting for 40% of its total consumption; followed by injection molding and film, accounting for 30% and 11% respectively.

It is estimated that the new capacity of PP in Africa will exceed 890000 tons/year from 2024 to 2030. In 2030, the gap between supply and demand of PP in the region will be about 710000 tons.

In the future, the application of PP in Africa will grow at a slower rate than in other areas, with the proportion of other areas showing an upward or stable trend.

The future growth of polypropylene demand in Africa mainly comes from three "locomotors", namely Egypt, South Africa and Nigeria. Egypt is Africa's second largest economy with a GDP of $475.23 billion in 2023 and a population of about 0.113 billion. The country has a history of thousands of years and a diversified economy, with agriculture, manufacturing and services all playing an important role. Tourism is an important contributor, attracting millions of tourists to experience the pyramids and temples. There is a strong demand for thin-walled injection molded, brushed and thin film types of polypropylene, which accounts for about a quarter of Africa's polypropylene consumption. With a GDP of $405.71 billion billion in 2023 and a population of 61 million, South Africa is the third largest economy in Africa. South Africa has a booming mining, manufacturing and rising technology industry, making it the second largest polypropylene consumer in Africa. Nigeria is Africa's largest economy with a GDP of $477.38 billion in 2023 and a population of more than 0.225 billion. Its economy is largely driven by oil exports, which makes it sensitive to changes in global oil prices. Nevertheless, Nigeria has a thriving service sector, a young population and diverse possibilities, and the third largest polypropylene consumption in Africa, with great potential in the future.

South American market

In recent years, the import volume of PP in the South American market has shown a steady growth trend.

In 2023, South America has a PP production capacity of nearly 2.98 million tons/year, a production of 2.08 million tons and a consumption of about 2.93 million tons. South America is the input of PP, with a net import of about 850000 tons.

South American PP supply is mainly concentrated in Brazil, Colombia and Argentina, accounting for 62%, 19% and 10% respectively, totaling 91%.

PP consumption in South America is mainly concentrated in Brazil, Argentina, Colombia and Peru, accounting for 55%, 10%, 9% and 9% of total PP consumption in South America, respectively, totaling 83%.

South America is rich in resource endowments. Some countries are actively promoting the process of industrialization, encouraging the development of manufacturing and processing industries, and will further increase the demand for raw materials such as PP in the future. At the same time, free trade agreements and trade facilitation measures in South America also provide a more convenient trade environment for polypropylene imports. In addition, with the increase of middle class population and consumption ability in South America, the demand for high quality and high-performance PP will continue to increase. These provide huge market opportunities for PP production and export enterprises with technical advantages, quality advantages and service advantages.

Global Supply and Demand Status and Forecast of PP

In 2023, Northeast Asia accounted for 50% of global PP production capacity; North America accounted for 10% of global production capacity; Western Europe due to rising energy costs, the proportion of production capacity fell from 13% in 2015 to 9% in 2023.

In 2023, global trade recovered after the epidemic, with PP trade growth accelerating from -3.86 per cent in 2022 to 0.61 per cent in 2023, but there is still a gap with pre-epidemic trade volumes expected to pick up sharply in 2024. From the perspective of China's PP exports, Southeast Asia has the advantage of rigid demand and low tariffs; the disadvantage is that the profits in the Vietnamese market have been compressed, and the strength of local enterprises in Thailand, the Philippines and Vietnam cannot be underestimated. The advantage of the South Asian market is that the demand gap is widening rapidly; the disadvantage is the need to be aware of credit risk. The advantage of the African region is that it has less production and is a net import market; the disadvantage is that there is room for improvement in the business environment. The advantage of South America is that imports are stable and high prices; the disadvantage is that it is difficult to obtain customers and is greatly affected by sea freight.

In 2023, Northeast Asia will remain the main consumer of PP in the world, accounting for 48%. North America and Western Europe accounted for 10% and 9%, respectively. This is mainly because the United States, as a global technology and economic giant, is entering the era of information, digitalization and intelligence, the flow of capital to the plastics manufacturing industry is gradually decreasing, and the demand for PP is mainly dependent on imports, resulting in a decline in the apparent consumption of PP. The acceleration of low-carbon transition in Europe and the reduction of local chemical production capacity have led to a decline in apparent consumption of PP. The share of consumption in South Asia rose to 9 per cent, mainly due to the gradual increase in the consumption capacity of emerging economies, represented by India.

In 2023, global PP products are mainly used in four major fields: injection molding, film and sheet, wire drawing and fiber, with the total consumption accounting for 94% of the total global consumption.

It is estimated that by 2030, the global PP production capacity will reach 136.38 million tons/year, of which Northeast Asia will reach 72.88 million tons/year, followed by the Middle East, North America and Southeast Asia, with production capacity of 12.26 million tons/year, 10.53 million tons/year and 10.32 million tons/year respectively. In 2030, the global consumption of PP is expected to be 107.11 million tons, including 49.74 million tons in Northeast Asia, 14 million tons in South Asia and 8.5 million tons in Africa.

In the future, with the rapid growth of demand for woven bags in the economic development of emerging economies, the proportion of wire drawing materials in the PP consumption structure will further increase, the proportion of injection molding will decline, and the proportion of other areas will remain relatively stable.

                                                                                  -- Source: China Petrochemical News