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Insight | Time:Dec 29 2017 3:33PM
Belated PP new capacities coming into operation in end 2017
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In 2017, there was 1.41 million tons/year new polypropylene capacities started up in domestic China, and domestic PP production totaled 14.4460 million tons in January-September 2017, up 13% on the year. But looking back the monthly growth rate, there was wide gap between the expected growth rate according to schedules in the beginning of the year and the actual one.

Below table shows while there is such wide gap between expected and actual production growth.
Region Plant Capacity (kt/year) Early-2017 scheduled start-up time Actual operating condition
East China Changzhou Fund 300 the beginning of 2017 stayed closed since Jul 1 2017
Northwest China Qinghai Yanhu 160 early 2017 in normal operation since Dec 21 2017
Northwest China Zhongtian Hechuang PP#2 350 Q2 2017 in normal operation since Oct 23 2017
Northwest China Shenhua Ningxia 600 May-17 test run in Dec 2017
Southwest China Yuntianhua 150 Q2 2017 commenced in end Nov 2017
North China Hebei Haiwei 200 Q3 2017 uncertain
Northwest China Jiutai Energy 300 Q3 2017 uncertain
South China CNOOC Huizhou Refinery II 400 Q4 2017-Q1 2018 may startup in Mar 2018

Among the new plants, only Zhongjiang Petrochemical achieved steady operation. Changzhou Fund had shut frequently after startup, and was almost suspended since July. Qinghai Yanhu and Shenhua Ningxia Coal II were shut short after their successful commence. Shenhua Ningxia Coal II might be brought on stream in November after the plants had completed maintenance.

In addition, PP supply tumbled with frequent accidental shutdown in this year. Apart from Datang Duolun and Hebei Haiwei, there were still some other prominent shut-downs in 2017, and contributed to outstanding supply losses.

As a result, actual supply increase in 2017 had fallen largely behind expected volumes, and this could cause further problem in late market.

1. Plastic stocks

Viewing total plastic stocks (PP & PE together) in PetroChina and Sinopec Groups, the rate in 2017 was on a decline trend. As stocks accumulated to a yearly highest after the Chinese Lunar New Year holiday in Feb, plastic stocks were lowering down gradually, and lingered around 600kt since July 2017.

In addition, the overall stock rate in 2017 was comparatively lower, as compared with that in 2014-2016.

2. Price

Under low stocks and relatively tight supply, PP prices maintained firmly at highs in 2017. The major futures contract prices had been staying around 9,000yuan/mt for most of times in the year.

In conclusion, the delayed startup and unstable operation of PP new capacities had delivered limited incremental supply to the market in 2017, falling largely behind market expectation. But these new capacities are slated to come on stream since the end of December 2017.

In 2018, there is 650kt/year new capacities expected to be released, adding up to a total capacity of 22.40 million tons/year in the year. Market supply is still growing but at a slower pace around 2.96%. As the actual capacity of polypropylene keeps expanding in the past years, capacity expansion seems to slow down.
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