Driven by Asia and the Middle East, the global polypropylene production capacity is expected to increase by 34% from 88.57 million tons / year in 2019 to 118.6 million tons / year in 2023. Polypropylene production capacity in Asia is expected to increase from 51.61 million tons / year in 2019 to 65.33 million tons / year in 2023, with an average annual growth of 5.9%. In 2023, China's capacity in the region will increase by about 11.63 million tons / year. China's PP growth is the fastest, and the diversification of raw materials is accompanied by strong downstream demand. This year's epidemic has affected the global flow of PP, and has a certain impact on the market.
Supply: in the third quarter, Chinese manufacturers planned to stop for maintenance relatively limited, and supply in China continued to increase in this quarter. In addition, three new PP plants in China were put into operation in September. In contrast, spot supply of duty-free goods in Southeast Asia was largely constrained in the third quarter due to factory shutdowns, and many producers in the region chose to focus on sales in their local markets, thus reducing the number of exports available.
Demand: in the third quarter, China's downstream demand was relatively healthy. Considering the sufficient supply, the downstream is not willing to hoard spot goods, because new capacity will be put into production in the second half of 2020. Demand in Southeast Asia is weaker than that in China, and downstream consumption is still slow as concerns about the possibility of a second influenza pandemic have dampened market sentiment and competitive prices in the region's domestic market further limit interest in imported materials.
Supply: limited supply in the third quarter, providing support for prices. Due to strong demand and good net return, the Middle East's distribution to China and Southeast Asia increased. During the coronavirus pandemic, production and raw material security challenges at some facilities in Saudi Arabia also led to shortages. Long term maintenance activities by a major producer in the second quarter further limited inventory and distribution.
Demand side: demand recovered in the third quarter, after restrictions imposed during the pandemic were lifted. Consumption in the food, medical and health packaging sectors was strong, with strong demand for disposable masks, bed sheets and disposable food packaging items. Products in the non essential category, such as molded consumer goods and industrial goods and packaging, remained slow as the downstream growth was largely slow.
Supply side: supply was adequate in the third quarter due to reduced demand for some applications. Some high-grade PP applications have driven demand, and some polypropylene manufacturers have turned to high-grade brands with strong demand, and the overall situation is mixed. Low prices in Europe mean that there is little supply of polypropylene in stock, and most imports are structured goods contracted from regular importers. The source said that according to their situation, the supply will be tight balanced or tight to see more.
Demand: after a surge earlier this year, demand in the packaging industry began to return to normal in the third quarter. The auto and home appliance industry began to pick up, and even the weak floor industry recovered by the end of this quarter. August was generally stronger than expected, with one producer reporting that August 2020 demand was the best in several years. The performance was weak in September as buyers had some inventory.
Supply side: supply became extremely tight in the US in the third quarter. The market had been tense before Hurricane Lara hit the US Gulf at the end of August, leading to more shutdowns and force majeure claims by polypropylene and upstream propylene producers. Some of the nuclear power plants affected by the hurricane have been closed for a long time, which has resulted in very limited operating rate, reduced production volume and reduced spot supply.
In the third quarter, demand for polypropylene increased as a result of manufacturing activity. Packaging and fiber applications have been strong since the outbreak of hubris, while demand for the automotive industry and other consumer durables picked up in the third quarter. Consumption so far this year is still a few percentage points lower than that in 2019, while year-on-year demand has basically returned to pre crisis levels at the end of the third quarter.
The trend of international PP market is basically the same as that of China.
The price trend of PP in the international market is basically consistent with that in FOB Middle East, FOB Europe and Houston, USA, and is basically consistent with that in China. The main reason is that China is the largest destination of net imports. Under the new epidemic situation, China has led the international price trend under the weak external supply and demand. Therefore, we should continue to track domestic prices, supplemented by foreign countries. Taking into account the strong economic recovery and the peak of production expansion and production next year, the probability of medium and long-term growth will rise and fall, and it will still be in the shock adjustment period in the short term.