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Insight | Time:Oct 20 2017 9:33AM
BOPP industry falls in dilemma of capacity expansion
 
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China’s BOPP capacity has been growing fast since 2010, fast to incur problems faced other oversupplied industry. As new capacities comes up fast and market supply gradually weighs over the demand, market has fallen into a fierce price competition. This could be told from a declining cash flow of BOPP film in recent years.

Due to heavy losses in cash flow, some old BOPP film capacities have been phased out, and many production lines, which of no competing features, are almost idled or sold already.

Continuous low profit pushes film makers to upgrade their technology and production quality, and some capable producers give up general thick film production and tend to produce more differential products, including higher-value-added dull, pearly films or tobacco film, etc.



2017 marked another year of expansion, after the growth rate relented for 2 years. Till October 2017, BOPP film capacity is assessed around 5.8871 million tons/year, up 350kt/year from the end of 2016 (effective capacity around 3.60-3.80 million tons/year). The operating rate of BOPP film plants in China is mainly fluctuating around 58-68% in 2017, and the rate could be around 90% based on effective capacity only.



With existing BOPP film plants upgraded fast in recent 2 years and more new capacities scheduled to be coming on stream, it is very hard for those long-term idled facilities to restart. The step of elimination gets quicker in this industry.

Up to the date, there are 7 new production lines of BOPP film started up, totaling 350kt/year, from Fujian Shidai (1), Zhejiang Jinrui (2), Zhejiang Lanye (1), Zejiang Qiming (1), Jiangsu Fengyuan (1) and Henan Yijinda (1). And the industry tycoon in China, China Softpackaging Group, continues expanding its BOPP capacity, and further improves its leading positive in the nation.



Based on increased capacity, BOPP film production also grew on year-on-year basis. (Above is an weekly BOPP film production growth compared with the same period of last year, showing mostly positive rate in the year.)



But BOPP film has recently fallen into an difficult situation, as price increase could not follow that of PP cost and film plants suffer constant profit reduction to almost none or even negative.



The order receiving in Sep-Oct 2017, two traditional peak months for film sales, has evidently been lower than that in 2016, and inventory of PP and film is also not to the rate of last year. Currently, most large film plants have around 7 days of orders received.

Some insiders consider the lackluster of film price lift, compared with feedstock cost, a result of capacity expansion. Till end of Sep, new BOPP film production totaled 350kt/year and could yield 900mt of film per day (based on an average operating rate of 90%). These plants have not stopped production during the National Day holiday (Oct 1-8) and inventory accumulates afterward. Market then falls a bit hard with limited sales under capacity expansion. Sufficient supply stops film makers from raising their prices as large as feedstock.
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