By John Richardson
THE above slide summarises where I think the future opportunities will lie for overseas polyolefins producers in the key China market. This is taken from my recent speech at the ICIS 4th World Polyolefins Conference in Amsterdam.
The main chance will not, it simply cannot, lie in providing vast quantities of commodity trade polyethylene (PE) and polypropylene (PP). How can this be the biggest opportunity when China is increasing its PE capacity by 47% and its PP capacity by 96% (see slide below) between 2010 and 2015. during a period when its economy is also slowing down?
Much of this capacity, especially in the case of PP, is based on coal feedstock. This means it is located inland China near coal reserves, in less-developed markets and so involves only standard commodity grades, such as PP raffia and injection moulding. Why, also, allow imports when this would destroy local jobs growth?
Instead, China will want higher-value grades, such as metallocene-grade PE. This will enable it to do “more with less” through downgauging by its plastic processors – i.e. producing the same strength of film with less resin than is the case with conventional grades of PE.
Doing “more with less” will also extend to providing support for an explosion of growth in the domestic recycling business. Polyolefins producers in the West, who have experience of working with recyclers in their home markets, should have an advantage here.
But these polyolefins producers might not include those in the US because of the US’s misguided opposition to the Asian Infrastructure Investment Bank (AIIB). President Obama compounded this error a few days ago when accused China of using its “sheer size and muscle” to push smaller countries around in the South China Sea.
This is a great opportunity for European, Asian and Middle Eastern producers whose home-country governments have both signed up the AIIB and are doing their sensible best to avoid antagonising China.
