BLOG: Global PP crisis: Why capacity may need to be 18m tonnes/year lower in 2024-2030

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson.

The global polypropylene (PP) industry is facing an unprecedented demand and supply crisis, brought on by what I see as the failure to see that China’s growth was going to slow to at least half the annual rate that we saw in 2000-2019.

Under the ICIS base case assumption that China’s annual average demand growth will slip to 5% from the long-term historic average of 10.6%:· global capacity PP in 2024-2030 would need to be a total of 8m tonnes/year lower than our base case to return to the 2000-2019 healthy average operating rate of 87%.

But producers need more scenarios. If China’s growth were to fall to 1.5% per year in 2024-2030, which I believe is perfectly possible – and even with growth in the Developing World ex-China and the Developed World higher than our base case:

Global PP capacity in 2024-2030 would need to be no less than a total of 18m tonnes/year lower than our base case to get to return to an 87% operating rate.

The core of the problem is that consensus forecasts for China’s long-term growth in PP were much higher than even our solid 5% base case just a few years ago.

This was despite evidence as long ago as 2011 that we would eventually be where are today, which is an economy facing major headwinds from ageing population and overreliance for growth on real estate.

The ICIS data show that it isn’t the pandemic that’s placed the global PP business in this situation as consumption lost during the pandemic looks set to be fully regained. It is instead predominantly about China

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.