Polypropylene: The annual export is back to positive value, and the oversea cross-border road of polypropylene is discussed

Polypropylene: The annual export is back to positive value, and the oversea cross-border road of polypropylene is discussed

In recent years, the supply capacity of the polypropylene industry has been continuously improved, and the production capacity has shown a year-on-year growth trend, from 23 million tons in 2018 to 34.71 million tons in 2022, and the average annual growth rate of domestic polypropylene production capacity in the past five years was 9.6%. Due to the failure of many sets of planned devices in 2022 to be put into operation as scheduled, it was postponed to 2023 to further increase the capacity expansion within the year, and the original expansion plan was superimposed, and the domestic polypropylene ushered in the largest expansion wave in history in 2023. By the end of 2023, the domestic polypropylene production capacity exceeded the 40 million ton mark and reach 40.06 million tons, with an increase of 5.05 million tons, an increase of 14.55%, and the increase and growth hit an eight-year high.

The domestic industry has expanded its capacity on a large scale, but the growth of domestic demand is limited, and the contradiction between supply and demand in the market is becoming increasingly prominent. In order to alleviate the pressure on supply, resource exports have become an important engine for the industry. Based on this, the major petrochemical and oil companies, large traders have been actively exploring export channels, and have achieved certain results. In addition, in order to improve international competitiveness and encourage exports, the country has formulated an export tax rebate system, coupled with China's market price for a long time in the world, more competitive in terms of price, export arbitrage window from time to time, export volume to maintain a certain volume.

Judging from the trend of China's polypropylene export volume in the past five years, domestic polypropylene exports are divided into several stages. Prior to 2021, the price difference window was opened less frequently, and for a shorter period of time, so there were fewer opportunities for exports. From 2019 to 2020, China's annual polypropylene exports continued to grow steadily, but the growth rate was slow, and the annual domestic polypropylene exports basically remained at the level of more than 400,000 tons. In 2021, due to the cold wave in the United States, many local polypropylene plants will be shut down, and the global flow of polypropylene goods changed, and goods from the Middle East and Far East was absorbed into high-priced areas such as the United States and South America. The domestic export window has been opened, and resources continue to flow to Southeast Asia. Domestic polypropylene exports showed a huge increase, with an increase of 227.21%. From 2022 to 2023, with the continuous expansion of domestic polypropylene production capacity, the pressure of market supply and demand will gradually become prominent, and the opening of the export market can better balance the relationship between supply and demand, and domestic polypropylene exports will remain at the level of 1.2 million to 1.4 million tons/year, with a relatively slow growth.

According to customs statistics, the cumulative domestic export volume of polypropylene from January to November 2023 was 1.2198 million tons, a year-on-year decrease of 0.05%. According to LYDD, it is estimated that the domestic polypropylene export volume in 2023 was about 1.3296 million tons, an increase of 4.27% over the previous year, and the export growth rate returned to the positive range.

The main reasons for the increase in domestic polypropylene exports in 2023 are: 1. Domestic capacity expansion. In 2023, the production capacity was greatly expanded, and most of the new production capacity was in the coastal areas, which was conducive to exports. Second, the phased depreciation of the renminbi is good for exports. In 2023, from April to June, the onshore and offshore RMB exchange rates depreciated by 5.4% and 5.7% respectively. On May 19, the central parity of the RMB exchange rate against the US dollar broke 7 for the first time this year. On 8 September, the onshore renminbi hit 7.3510 against the US dollar, the lowest since late December 2007. Third, the demand of major export receiving countries has rebounded. The main domestic polypropylene export destinations are in Southeast Asia, and the overall scale accounts for more than 30% of the total annual polypropylene exports. Among them, Vietnam is the largest exporter of polypropylene in China, accounting for 15%-16% of the annual export volume. Vietnam's GDP for the full year of 2023 increased by 5.05% year-on-year, higher than the expected 4.7%, according to data released by the General Statistics Office of Vietnam on December 29. With the recovery of the economy, the demand for polypropylene, which is closely related to people's lives, has also rebounded, especially for film and wire drawing.

In 2024, the domestic polypropylene capacity expansion will continue, and the Chinese polypropylene market will be subject to the supply pressure brought by the high-speed expansion. The international market has gradually entered the inventory construction cycle, and markets such as India and South America may undertake some Chinese resources in the export window opening cycle, and it is expected that domestic polypropylene exports will still perform well in 2024.