VINACHEM

Last year, ICIS estimated that China’s polypropylene (PP) capacity exceeding its demand was 6.9m tonnes.

This is expected to reach 11.6m tonnes in 2025, which would be an increase of 68%. As recently as 2009, China’s PP capacity was 4.4m tonnes short of local demand.

It was only in 2021 – the year of the Evergrande Turning Point and following China’s 2014 decision to push much harder towards chemicals and polymers self-sufficiency – that China moved into a slight surplus of 0.3m tonnes.

The surplus jumped to 2.2m tonnes in 2022 as China’s long-term economic downturn began to take hold.

Now let us look at China’s percentage shares of total global PP capacity exceeding demand from 1992 onwards, when the Chemicals Supercycle began.

In 2009, China’s percentage share of total global PP capacity exceeding demand was minus 53%

This year, China’s percentage share is expected to reach no less than 46%, ten percentage points higher than 2024, eclipsing all other regions which are expected to be in the single digits.

Just how difficult this year will turn out to be will of course depend on the strength of China’s demand growth

A Chinese economist suggests that last year’s real GDP growth in China was less than 2.5% rather than the official government estimate of 5%.

China’s population may have been 130m lower in 2020 than the official government estimate, according to the ICIS economist Kevin Swift.

The lower the economic growth then of course the lower the demand growth for PP and other chemicals and polymers and the greater the overhang of China’s PP capacity versus local demand, further reducing China’s need for PP imports.

In January-November 2024, China’s exports of PP reached 2.2m tonnes versus 1.3m tonnes in 2024 and only 425,000 tonnes as recently as 2020.

There is obviously the potential for exports to be even higher in 2025 in an environment of weak local demand growth and the capacity additions.

How much higher will depend on the levels of protectionism. PP producers elsewhere may well, I believe, seek more antidumping, safeguard and tariff protection.

We must also consider how the pace of China’s PP capacity and production growth will be affected by its ability to indirectly export PP as packaging for or components of finished goods.

Increased protectionism could again play a role here, in reaction to the belief that China as aggressively raised its exports of low, medium and high-value manufactured goods since 2021 in order to compensate for the collapse of the real-estate bubble.

Take a deep breath, stand back from the market noise, think what the ICIS data is telling you and build scenarios to get through 2025.  – Source: ICIS