BLOG: China may see either annual average PP net imports of 4.9m tonnes or net exports of 7.2m tonnes in 2024-2030

John Richardson

02-Apr-2024

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. China could end up as the world’s second-biggest polypropylene (PP) net exporter in 2024-2030 behind the Middle East.

Today’s scenarios involve China seeing average annual PP net imports of 4.9m tonnes in 2024-2030 (the ICIS base case), average annual net exports of 1.7m tonnes under Downside 1, or annual average net exports of 7.2m tonnes under Downside 2.

Downside 2 – where China could be second the global export league table behind the Middle East – seems very unlikely given rising trade tensions.

Nevertheless, both the downsides in today’s post demonstrate just how much the petrochemicals markets in general have changed since late 2021.

Only two-and-half years ago, you had to make such big adjustments to the ICIS base cases to get to significantly increased rates of China PP and other petrochemicals self-sufficiency that the adjustments didn’t make sense.

Now, just relatively minor changes are required to produce big declines in China’s projected net imports because of the following:

  • The collapse of the property developer Evergrande in September 2021 signalled that China had moved into an era of lower economic and therefore petrochemicals demand growth. I flagged this up at the time and it has now become accepted wisdom. The end of the property bubble, worth some 29% of China’s GDP, has occurred as China’s ageing population exerts more downward pressure on the economy.
  • A lot more new petrochemicals capacity has been added in China.

And here’s the thing: There’s a total of 10.5m tonnes/year of unconfirmed China PP capacity in the ICIS Supply & Demand Database between 2024 and 2030 that are not factored into any of today’s trade-flow scenarios.

China has pretty much bankrolled the global petrochemicals industry since 1992, the year of Deng Xiaoping’s Southern Tour.

Such was the subsequent strength of China’s consumption growth versus insufficient investment in local capacity that the petrochemicals industry became over-reliant in lucky events in just one country.

Now our luck has run out.

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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