November 13, 2024 – Propylene Market Poised for Intense Competition Amidst Massive Capacity Expansion
Propylene, a cornerstone raw material in the basic chemicals sector, continues to demonstrate its indispensable importance in the chemical industry through its diverse production processes. Serving as the backbone for the production of numerous chemicals such as polypropylene, acrylonitrile, and propylene oxide, propylene is manufactured through various routes including fluid catalytic cracking (FCC), propane dehydrogenation (PDH), and methanol-to-olefins (MTO/MTP, CTO/CTP) technologies.
The year 2023 witnessed a peak in propylene production capacity additions in China, with over 9 million tons of annual capacity coming online, fueling rapid expansion across the propylene value chain. This trend has intensified in 2024, with nearly all of the 7.01 million tons of new global propylene capacity stemming from China, primarily through naphtha crackers and PDH units. According to AsiaMB, an additional 6.35 million tons of propylene capacity is expected to come online in China by the end of 2024, further intensifying domestic market competition.
Globally, trade flows of propylene and its derivatives are undergoing significant shifts. The Middle East, North America, the Commonwealth of Independent States, Northeast Asia, and Southeast Asia are emerging as major net exporters, while India, Pakistan, Central and Western Europe, and South America are becoming significant net importers. Despite a dip in trade volumes in 2021 due to various factors, trade volumes rebounded in 2022 and are projected to grow further in 2024, with notable contributions from India, Pakistan, and Northeast Asia. Northeast Asia, in particular, has transitioned into a net exporter since 2021, a trend that is expected to strengthen, while India and Pakistan are seeing increasing net imports due to rising demand. Western Europe, a net importer, is anticipated to maintain slow growth in net imports in 2024 due to limited new capacity additions and sluggish demand growth.
Among the various routes for propylene capacity expansion, the PDH route is witnessing a surge in investments. China’s propylene consumption has been growing rapidly, driving significant capacity expansions. While new capacity additions in 2024 are expected to be lower than those in 2023, they remain at high levels. Traditional propylene production routes are seeing a decline in new investments, whereas the PDH route is experiencing robust growth. By the end of 2023, China had 34 PDH plants with a total capacity of approximately 18.18 million tons per year, and an additional 4.75 million tons of new capacity is expected to come online in 2024. The PDH route accounts for a whopping 75% of new propylene capacity additions in 2024.
Amidst this massive propylene capacity expansion, China’s propylene consumption growth is expected to accelerate slightly in 2024, but the expansion rate far outpaces consumption growth, leading to a continuous rise in self-sufficiency and increasing supply-side pressure. Propylene equivalent consumption is projected to grow at a rate of 5.7%, primarily driven by downstream products such as polypropylene and propylene oxide. Among downstream products, polypropylene is expected to see its application scope expand due to China’s high-quality economic development, although demand growth may be tempered by sluggish traditional sectors like real estate. Polypropylene consumption is forecast to grow at a rate of 4.6% in 2024, reaching approximately 38.49 million tons. Propylene oxide, with a diverse range of downstream products and polyether polyols as a key raw material for polyurethane production, is projected to reach a domestic consumption of 5.36 million tons in 2024, with an apparent consumption growth rate of 16.6%. Acrylonitrile consumption is expected to reach 3.29 million tons in 2024, growing at a rate of 14% fueled by capacity expansions and demand for ABS. Acetone, with 250,000 tons of new capacity expected in 2024, is anticipated to witness rapid demand growth, reaching 3.54 million tons, an increase of 20% year-on-year. In contrast, 2-ethylhexanol, butanols, acrylic acid, and esters are expected to experience slower demand growth due to various factors.
In summary, the propylene market in 2024 will face complex supply and demand dynamics and intense market competition amidst massive capacity expansions. With diverse trends across downstream products, the industry landscape is undergoing significant restructuring. Under these circumstances, companies must closely monitor market movements and flexibly adjust their strategies to navigate challenges and seize opportunities.