WPC 2020: China could become PP net exporter on capacity surge

17:23 PM | April 8, 2020 | Clay Boswell

Increasingly self-sufficient in polypropylene (PP), China has the potential to become a net exporter of the resin, says Joel Morales, executive director/polyolefins, Americas at IHS Markit. Speaking at IHS Markit’s World Petrochemical Conference 2020 Online, he noted that inexpensive propane imports and the country’s highly efficient project resource base could support an internationally competitive cost position.

The rapidly expanding manufacturing base in southeast Asia could become China's first customer. "If they keep building these plants as fast as they are, and they can't consume it all domestically, then maybe they'll start exporting within the region," Morales says. "This is something that we are definitely watching."

Twenty-one PP plants are slated to go online in China this year, an unprecedented pace of expansion. "With everything that's going on, there will likely be some delays," says Morales, "but a lot of them will start."

The new plants, a combined 6.1 million metric ton/year (MMt/y) of capacity, will far exceed the 2020 increase in Chinese demand, currently forecast at less than 1 MMt. "This is capacity, not production," Morales notes, "but it brings up the question: Can China become potentially a net exporter?"

Most of the new PP plants are being built near the coast in east or northeast China, facilitating not only the export of resin, but also the import of propane, which can be converted to feedstock propylene by propane dehydrogenation (PDH).

"How is it possible that they can do that in China and be so competitive?" asks Morales. He points to both the competitiveness of the global propane market and the local advantages supporting capital investment. "Unlike ethane, you can get propane from various parts of the world," he notes. "Yes, there's freight, but when you can build so cheaply and efficiently in China, the savings in capex can often offset that freight. And [that's] one of the reasons we've seen such an increase in PDH to PP in China."

Some Chinese PDH/PP projects in China have been built in less than 24 months. "They've got government support; it's very easy to acquire land; they've got great and efficient labor," says Morales. "We've heard stories of Chinese welders being two or three times more efficient than welders in other parts of [Asia]. They're getting really good at what they do."

The construction contract model employed in China also helps to hold down costs and speed completion. "There, which is a little bit different than in the West, they get their contractor, and they agree to pay a set fee. There is no 'over-budget', so the construction company is heavily incentivized to deliver, which reduces the risk [to] the company producing polypropylene."

China's position as a potential exporter is further enhanced by the flexibility of the production assets. Most of the country's PP plants employ dual-reactor technology capable of producing not only homopolymer and random copolymer resins, but also impact copolymer, which "should allow them to make whatever they want," says Morales.