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What does China’s self-sufficiency mean for global PP markets?

by Merve Sezgün - msezgun@chemorbis.com
  • 05/08/2022 (08:33)
ChemOrbis Stats Wizard shows that China’s PP imports hit a 14-year low in the first half of the year while PP exports were near a record high. Even though China still imports more PP than it exports, statistics clearly suggest that China is on the brink of self-sufficiency and winds of change have already begun to blow in global PP markets.
In the January-June period of 2022, China exported nearly 860,000 tons of PP. The top three destination countries for Chinese PP were reported as India, Vietnam and Pakistan. India accounted for more than 11% of the total exports..

PP – export – China

This picture has not come as a surprise as China has been adding huge PP capacities in recent years to achieve its target of self-sufficiency. By the end of this year, the country is expected to add another 4.5 million tons of PP production capacity if everything goes as planned.

“Some of these new plants could face delays given current weaker margins and unfavorable market conditions,” some players noted and added, “Still, the world of polypropylene is set to host a new major supplier soon. And the question is how this rising capacity will affect global PP markets.”

China is still the largest PP buyer, but its imports shrink gradually

Despite its rapidly increasing domestic production capacity, China still imports PP more than any other country in the world. According to Global Trade Tracker data, it remained the largest PP buyer in 2021, with its total imports reaching more than 4.6 million tons accounting for around 13% of all global imports.

However, data also show that total PP imports to the country in the first half of 2022 fell by 13% from a year earlier to 1.98 million tons, marking the lowest volume since 2008. Over the years ahead, China’s import PP market will continue shrinking in line with the domestic capacity additions.

China set to be a major exporter to challenge global trade flow

Saudi Arabia and South Korea were the world’s largest PP suppliers in 2021, accounting for about 21% and 9% of all exports, respectively. They were followed by China with a market share of almost 6%, meanwhile.

In line with the capacity additions - 4.5 million tons already started up in 2021 and another 4.5 planned for 2022 - China is not only on the way to be self-sufficient, but also this will help it be a net-exporter in the years to come.
As China’s import PP demand is set to decrease further, major suppliers will be looking for alternative destinations to divert their cargoes. That is to say, Middle Eastern and South Korean producers will have to face an inevitable loss in market shares inside China and a fiercer competition outside China as China will also be in the game as a big exporter. .

Where will Mid-East and S. Korean PP go amid diminishing China demand?

Trade data show that the world’s second biggest PP buyer is Turkey. In 2021, the country imported almost 2.4 million tons of PP, accounting for 10% of the overall global import business. Meanwhile, Turkey was followed by Vietnam, Italy, Germany, and India last year.

“With China becoming self-sufficient, we think that the first destination will be Turkey for Middle Eastern suppliers. This may downsize West European producers’ market share in that country,” a player commented.

Not only Middle Easterns but also South Korean and even Chinese suppliers could target Turkey more in the future. In the first half of 2022, Turkey’s top three PPH suppliers were Saudi Arabia, South Korea and Russia.

A trader in Asia opined, “South Korean PP would head more for Southeast Asia, or Vietnam in particular. Adding to a potential flow of Korean, Chinese and Middle Eastern PP cargoes, the region itself is increasing production with new capacities. In the case of a self-sufficient China, SE Asia PP markets could face a supply overhang for years.”

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