How will the polypropylene (PP) industrial chain profit in the future

- Nov 22, 2019-

Polypropylene due to polymerization process simple, non-toxic, odorless, tasteless, chemical stability strong, resistant to acid and alkali, light quality, impact resistance, strong toughness, thermoplastic processing machinery performance is good, since the 1950 s realized industrialization development is very rapid, widely used in injection molding, plastic woven, fiber, film, pipe, and other fields.With the expansion of production capacity of diversified subjects in recent years, the domestic polypropylene industry chain has entered the era of overall surplus. Meanwhile, the downstream concentration degree is increasingly high and the consumption structure is gradually upgraded.In response to this trend, polypropylene suppliers should "seek new and change", focusing on strengthening product development, adjusting marketing model, making good use of futures market and promoting product export to achieve high-quality growth.1. General situation of polypropylene1. Global polypropylene capacityPolypropylene is generated by propylene monomer polymerization of a thermoplastic, in the 1940 s, Phillips, the company developed the crystallization of polypropylene, the early 50 s Italian professor Natta success will propylene polymerization with the structure of the stereoregular polymers, 1957 Italian Montecatini company the construction scale of 5000 tons of industrial equipment, thus created the industrial production of polypropylene.After more than 60 years of development, polypropylene plant gradually large, intensive, raw materials gradually diversified, products gradually diversified, functional, engineering, specialized, polypropylene has become synthetic resin products in the largest capacity, the largest output, the fastest development of varieties.At the end of 2018, global polypropylene production capacity was about 81.7 million tons, mainly concentrated in northeast Asia (43%), Western Europe (12%), North America (11%) and the Middle East (11%).Much of the new capacity has come from the Middle East and China in the past decade.2. Main production process of polypropyleneThe main production process of polypropylene is bulk process, gas phase process and bulk - gas phase process.As the bulk method is not suitable for the production of impact resistant brand, the new polypropylene device mainly adopts the gas phase method or the bulk gas phase process.Main production process of polypropyleneIi. General situation of polypropylene in China1. Polypropylene capacity in ChinaChina's polypropylene industry started in the 1990s, when the production capacity of small bulk powder was more than 1 million tons, and increased to more than 3 million tons at the turn of the century, and nearly 13 million tons in 2010.After 2010, with the entry of private capital into the petrochemical industry and diversification of propylene raw materials, domestic polypropylene production capacity expanded substantially and polypropylene devices tended to be large-scale. In 2018, domestic polypropylene production capacity reached 22.2 million tons (granular), accounting for about 27% of the global production capacity.Currently, sinopec is the largest polypropylene producer in China, with an annual capacity of 7.26 million tons in 2018, accounting for 32.7 percent of the domestic production capacity.However, with the expansion of new domestic production capacity in recent years, the market share of sinopec polypropylene has gradually decreased and its market influence has been weakened.The market share distribution of domestic polypropylene is shown in figure 1.China's polypropylene production capacity will reach 10,000 tons in 20182. Polypropylene consumption in ChinaIn 2018, domestic production of polypropylene pellet was 20.27 million tons, import 4.79 million tons, export 360,000 tons, and apparent consumption 24.71 million tons, an increase of 1.03 million tons or 4.3 percent over 2017.Import dependence was 18.0 percent, 0.6 percentage points lower than in 2017.From 2015 to 2018, domestic consumption of polypropylene will be ten thousand tons3. Consumption structure of polypropylene in ChinaDomestic polypropylene is mainly used in plastic weaving, injection molding, film, fiber, pipe and other fields.Plastic braiding is the application field with the largest consumption of polypropylene. It is mainly used for weaving bags, packing belts, ropes and so on.Injection molding is the second largest application field of polypropylene, mainly used in automobiles, home appliances, medical devices, daily necessities, equipment parts and components.According to the different requirements of products, different types of raw materials are used, including homopolymerization, impact copolymerization and random copolymerization.Thin film is the third largest application area of polypropylene, mainly divided into oriented film (BOPP) and non-oriented film (cast film and blown film).BOPP has excellent mechanical and optical properties, light, non-toxic, odorless and moisture-proof, and its main products are flat film, heat sealing film, smoke film, electrical film and extinction film.CPP has high stiffness, transparency, moisture resistance, heat resistance and chemical resistance. The main products are packaging film, aluminum film, heat sealing film, cooking film, plastic film and so on.Blowing film main products are general packaging film, heavy packaging film, agricultural film and so on.Polypropylene fiber products are mainly filament, staple and non - woven fabrics.Filament is divided into monofilament, compound filament and cord filament, staple fiber is divided into cotton, wool and medium length filament.Filament and staple fiber generally choose to fuse 20~30 fiber material.Non-woven fabrics are divided into spun-bonded non-woven fabrics (raw materials fusion refers to 30~40) and melt-blown non-woven fabrics (raw materials fusion refers to more than 500), which are mainly used for medical and health supplies, cleaning supplies, thermal supplies, geotextiles and so on.Polypropylene pipe products are divided into homogeneous polystyrene (PPH), copolymer (PPB) and unregulated (PPR).PPR pipe is the most widely used at present, with good heat resistance, cold resistance and pressure resistance. It is mainly used for building cold and hot water delivery pipe, heating pipe, beverage pipe, etc.In addition, polypropylene can also be used for foam, blow molding, heat molding and other fields.Domestic consumption structure of polypropylene3. Development trend of domestic polypropylene industry chain1. Diversified propylene raw materialsIn 2010, shenhua baotou coal chemical plant was successfully put into operation, which started the process of diversification of coal chemical industry and propylene raw materials in China.From 2012 to 2014, the continuous high international oil price highlighted the advantages of unconventional raw materials, further accelerated the investment in coal chemical industry and propane dehydrogenation (PDH) projects, and rapidly increased the production capacity of polypropylene based on coal or propane.In 2018, the domestic production capacity of polypropylene pellet was 22.2 million tons, among which the production capacity of naphtha or FCC and other conventional petroleum as raw materials was 12.44 million tons, accounting for 56%.Coal production capacity of 7.27 million tons, accounting for 33%;PDH has a capacity of 2.5 million tons, accounting for 11%.In addition to the conventional naphtha steam cracking, coal-to-coal MTO/MTP and PDH, the light hydrocarbon cracking technology with light hydrocarbon and heavy oil as raw materials, represented by yantai wanhua and daqing fellowship, has also been applied.With the increasing diversification of propylene raw materials, the cost competition caused by different raw materials and processes will be more intense.2. Import dependence is gradually decliningIn recent years, on the one hand, domestic polypropylene production capacity has increased substantially; on the other hand, the Middle East is rich in natural gas and oil associated gas and other wet gas resources; on the other hand, the shale gas revolution in the United States has continuously promoted the lighter cracking raw materials, resulting in slow growth of propylene and little new polypropylene production capacity.Under this circumstance, the import volume of polypropylene in China has been stable in recent years, with a rapid decline in import dependence, from over 30% ten years ago to less than 20%.The change of China's polypropylene imports from 2014 to 2018 is shown in figure 3.China's dependence on polypropylene imports was 18.0% in 2018, down 0.6 percentage points from the previous year.In the future, as the domestic polypropylene production capacity continues to expand, import dependence will continue to decline.China imported polypropylene from 2014 to 20183. Overcapacity across the boardStarting from 2019, domestic polypropylene entered a new round of capacity expansion period.According to the current production plan, domestic polypropylene will have 9.51 million tons of new capacity in 2019-2020, and another 11.2 million tons of planned capacity after 2021.If all these capacity are finally put into production as scheduled, domestic polypropylene capacity is expected to reach 45 million tons around 2025.At the same time, the growth of terminal consumption cannot keep pace with the rapid expansion of new production capacity.From January to may this year, the domestic plastic products output was 28.87 million tons, down 1.2% year-on-year.Several industries closely related to the plastics industry have performed poorly.Automobile production was 10.18 million units, down 14.1 percent year-on-year.The output of washing machines with the largest plastic materials in home appliances was 30.74 million units, up 6.9% year-on-year.The output of refrigerators was 34.61 million units, up 3.7% year-on-year.In addition, the economic and trade frictions between China and the United States and the rise of trade protectionism will also have a negative impact on China's export-oriented economy.4. The consumption structure is gradually upgradedDomestic consumption structure of polypropylene has been gradually upgraded in recent years, but there is still a gap with developed countries in Europe and the United States.In 2018, the proportion of plastic-woven products in China was still over 30 percent, compared with less than 20 percent in developed countries.Domestic injection molding products proportion 27%, developed countries are about 35%.In addition in the technical content of higher foam, injection and blow, heat molding and other fields, the domestic proportion is also relatively low.Classification does not look, domestic polypropylene also is general purpose product proportion is big, special product is little.For example, injection products in high flow, high impact, high rigidity, high transparency and low odor, low VOCs products are few;Less melt-blown non-woven fabrics;Many pipes are not produced with special materials;Electrical film in the film, three - yuan heat sealing film ratio is not high.The development of domestic high-end manufacturing industry and the improvement of people's living standards will lead to the gradual upgrading of polypropylene consumption structure.5. The "multi-polarization" of suppliers is becoming more and more obviousWith the rise of coal chemical industry, shenhua, China coal and others joined, the original sinopec, petrochina "two barrels of oil" pattern was broken.From the second half of 2019, with the production of many private enterprises such as dalian hengli, zhejiang petrochemical and donghua energy, the market share of "two barrels of oil" is bound to further decrease, and the domestic polypropylene industry officially enters the era of "competing for the deer".6. The concentration degree of downstream industry is increasingly highIs the opposite of upstream trend, the national environmental protection policy is more and more strict, the tax collection and administration method is more and more advanced cases, accompanied by all walks of life pay more attention to product quality and more and more high degree of automation, the role of "scale economy" is more and more obvious, the original polypropylene downstream the phenomenon of "small and scattered" accelerating change, is bound to European and American developed countries "scale", "intensive".7. Mainstream suppliers have a growing desire for "innovation and change"With the "one big" pattern no longer existing, mainstream suppliers have to pay more active attention to the changes in the needs of downstream customers.In addition to the traditional product differentiation strategy, more attention is paid to the implementation of "one product one policy", "one family one case", "contract sales" and other strategies.At the same time, when working with downstream customers, they are more likely to provide "solutions" rather than just products.For example, sinopec not only completely reformed the packaging line and packaging method, but also took the lead in implementing the concept of "Shared pallet" in China, from guaranteeing product quality to improving logistics operation efficiency, and practicing the concept of green and low-carbon development.Suggestions for the future1. Accelerate the development of new productsIn the face of the overall surplus of domestic polypropylene, the only way to avoid the red sea of price competition is to implement the differentiation strategy and develop high value-added special materials to replace imports.At present, the products with high added value in polypropylene include:1. Electrical membrane material: ash content is required to be below 20ppm, and some imported brands have been below 10pm2. Special material for terpolymer casting film: low heat sealing temperature (below 110℃)Metallocene polypropylene: used in the production of non-woven cloth/film/container4. High melt refers to polypropylene with high modulus and high impact resistance: melt refers to polypropylene with over 60 and bending modulus exceeds 2000MPa5. Melt spraying non-woven materials: melt refers to more than 10006. High transparent materials: mainly used in the medical industry7. Elastomer: used for film, waterproof coil, automotive interior decoration and mixing modification8. High melt strength polypropylene: used in blow molding and foaming fieldsIn addition, with the development of modification technology of polypropylene, polypropylene into many previous engineering plastics application field, expand the scope of application of polypropylene, become a new growth point.Modified material customized for customers, more brands, small batch, need strong technical support.2. Optimize customer structureFor a long time, domestic plastic products enterprises are mainly small and medium-sized factories, subject to their own capital, supplier payment conditions and other restrictions, many of them do not directly purchase from suppliers, but through the dealer channel.The main problems are as follows: the proportion of direct selling customers of suppliers is low, and the control over the terminal is not enough, so it is difficult to grasp the final flow;It encourages dealers to play games between suppliers and end customers, and it is easy to cause market ups and downs.For suppliers, optimize the customer structure step by step.There are too few direct selling customers and too many dealers, so it is difficult to maintain a stable sales channel. Once the market fluctuates, the shipment is blocked, which will affect the normal production of the enterprise.First of all, we should vigorously develop terminal factory customers, especially those who are representative of the industry or the direction of industry development, which not only requires suppliers to have high-quality products, but also needs to tailor marketing plans and corresponding marketing policies according to customer characteristics.Secondly, it is to cultivate the best and eliminate the worst, and comb out dealers' customers.We should concentrate our resources on large dealers with strong financial strength, sales ability and research ability, and establish a close relationship of win-win cooperation between the two sides.For the strength of weak, speculative market dealers, to shrink resources, gradually phase out.At the same time, we should guide dealers to concentrate on a certain downstream area, or a regional market, do not attack around, what do not good.3. Promote contract pricingAt present domestic resin product basically is given priority to with spot price, add dealer numerous, the market speculates atmosphere is thicker, buy to rise do not buy to fall, when rise, compete to want goods, when fall each other jilt goods, cause market price to fluctuate greatly.Therefore, to select the right products and customers, actively promote contract pricing.According to the characteristics of products and customers, different contract pricing methods such as weekly price, monthly price, quarterly price, third-party formula pricing and auction price are selected to weaken customers' speculation psychology, calm down market fluctuations and balance the sales pace.4. Make good use of futures instrumentsWith the increasing participation in futures trading in the upstream and downstream of the plastics industry chain, the influence of the futures market on the spot market has increased significantly and has gradually become the main force leading the spot market.Facing the current reality and the situation of accelerated expansion of production capacity, relevant enterprises should strengthen the research on futures market, and combine their own business characteristics, actively participate in futures trading, make good use of futures tools, so as to avoid market risks and promote spot sales.5. Develop export businessWith the substantial expansion of domestic production capacity, the overall surplus of polypropylene is inevitable, and the contradiction between supply and demand will increasingly appear.Polypropylene suppliers should consider the international and domestic markets as a whole, not only to continue to cultivate the domestic market, but also to expand the international market.We should select people who are familiar with international trade, deeply study relevant laws, regulations and market conditions, select the right target market, the right export products, the right trade method and the right export opportunity, actively and steadily carry out export business and reduce the pressure of the domestic market.