BLOG: China PP industry: Short-term tactics and long-term strategy
SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. The short-term tactics of China’s polypropylene (PP) producers are clear from the latest export data combined with the ICIS Pricing numbers.
China’s total PP exports in January-April 2023 fell to 436,195 tonnes compared with 486,727 tonnes during the same months last year.
But the overall decline masked growing pressure from competitively priced Chinese products in the southeast Asian market, particularly in Indonesia, mainly in raffia grade.
China’s exports to southeast Asia increased to 163,101 tonnes in January-April this year from 127,042 tonnes in January-April 2022. The main reason was a sharp rise in shipments to Indonesia and the Philippines.
Indonesia’s PP raffia grade price premiums over China increased from $59/tonne in December 2022 to a peak so far this year of $151/tonne in February, before declining to $106/tonne in May. The rise in price premiums attracted more shipments from China, probably resulting in the dip in premiums from March until May.
We will see this pattern across a wide range of China’s export destinations in south Asia, Turkey, Latin America, etc. We believe that the increased pressure from Chinese exports will result in greater volatility in pricing differentials between regions and countries.
The pressure exerted by Chinese PP exports has increased because China’s PP demand could fall by 1% in 2023, as it plans to add 4.6m tonnes/year more capacity. China’s capacity as a percentage of demand could reach 124% this year, having first surpassed 100% in 2021.
China’s long-term exports of PP may also include higher value as well as commodity grades of PP. Do not assume that China won’t be able to access or develop the catalysts and technologies to achieve this.
Editor’s note: This blog post is an opinion piece. The views expressed are those of the author, and do not necessarily represent those of ICIS.
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