Highlights: China’s PP capacity is supposed to continue expanding in 2023, and the newly constructed capacity may exceed 6 million mt/a. The growth rate of PP supply may outpace 10%. It is predicted that PP supply pressure will be especially high in H1, 2023.

Capacity expansion plans were intensive in 2022, but some plans were postponed because of profits and market demand. As of November 2022, China’s newly added capacity totaled 2,730kt/a, and PP capacity reached 33,940kt/a with a growth rate of 8.4%. The growth rate this year was lower than that in 2021. However, it is predicted that Sinopec Hainan Refining & Chemical and Fujian Zhongjing Petrochemical will put new units into operation in December 2022.

In 2023, China’s PP industry is still in the process of capacity expansion. According to the latest research of SCI, the newly added PP granule capacity may reach 6 million mt/a in 2023. Specifically, the capacity expansion will be relatively intensive in Q1, 2023, during which some capacity was originally planned to be released in 2022. The possibility of commissioning is large. Therefore, the capacity release will influence the PP market greatly in Q1 or even in H1, 2023. There will be a lot of newly added units in H2, 2023, but there may be also some uncertainties. Participants are recommended to focus on the supply increase in Q4, 2023.

2023 China PP Capacity Expansion Plans

Unit: kt/a

Source: SCI

Remarks: High costs from producing PP arise due to high energy prices. At the same time, sluggish demand dragged down the sales of PP products. PP producers also faced low economic benefits, bringing uncertainties to the commissioning of new units. The above commissioning time is based on the current research, for reference only.

In recent years, China’s PP capacity expansion gradually transferred to consumption regions. Capacity was mainly released in East China, North China and Northeast China this year. Therein, newly added capacity in East China occupied above 70% of the total fresh capacity. In North China, Tianjin Bohai Chemical and Weifang Shufukang New Material built new PP projects. Comparatively, capacity expansion was slow in Central China and Southwest China.

In H1, 2023, the capacity expansion will be concentrated in South China and North China. There will be rich PP resources around Hainan, Chaozhou-Shantou region, the Pearl River Delta region and Maoming-Zhanjiang region, if Sinopec Zhenhai Refining & Chemical Phase II, PetroChina Guangdong Petrochemical Refining-Chemical Integration Project, Dongguan Juzhengyuan Technology Phase II and Oriental Energy Maoming Petrochemical Phase I are put into production. The market competition will become fiercer. In H2, 2023, Sinopec Anqing Petrochemical and Ningbo Kingfa Advanced Materials will release new capacity. Resources from Sinopec Anqing Petrochemical will mainly flow into Anhui and surrounding areas, and those from Ningbo Kingfa Advanced Materials may affect the mainstream resources in Zhejiang. Besides, the competition will be fiercer in Fujian, and the PP market in southern Zhejiang and Chaozhou-Shantou region will change if Fujian Zhongjing Petrochemical and Grand Pacific Petrochemical put new units into use.

Overall, there will be increasing supply pressure in 2023 with unabated capacity releases, but the growth rate of PP demand will probably be catabatic, which may lead to a supply glut. That may weigh down the PP price. Specifically, PP prices may lose ground in H1, 2023 because of heavy supply pressure. In H2, 2023, the commissioning of some units may be delayed. Meanwhile, if the downstream demand for PP brightens, the price decrease of PP will be cushioned.