PP production capacity distribution and profits of different production processes

In 2023, China domestic PP production capacity has increased 1.85 million tons/year to 35.985 million tons/year, an increase of 5.42% compared to the end of 2022.

In terms of regional distribution, China's production capacity was mainly concentrated in Northwest China, East China, and South China, accounting for about 25%, 22% and 20%, respectively. In the past two years, the new plants are mainly concentrated in the coastal areas. As a result, the proportion of production capacity in East China, South China, North China, and Northeast China has increased to varying degrees.

From the perspective of production process, China domestic PP plants is mainly oil-based plants, and coal-based (including MTO) plants and PDH-based plants, accounting for about 55%, 25%, and 15%, respectively. In the past two years, with the large-scale production of oil-based plants, the proportion of oil-based PP plants has increased, while the proportion of coal-based (including MTO) and PDH-based plants has corresponding decreased.

Seeing from the current cash flow of each production process:

Currently, PDH-based PP incurred less loss compared with other production process. Since the propane prices dropped at the beginning of February, the profitability of PDH has continued to improve and the cash flow turned positive in the second half of March and has remained positive for nearly two months. However, since the second half of May, with the rebound of propane prices, the cash flow of PDH has started to decline again and the cash flow of PDH has turned negative again. Since 2023, the average cash flow loss of PDH is about 254yuan/mt.

The cash flow trend of oil-based PP is similar to that of PDH, but the loss is more severe. The profit has been slim since 2023, with an average cash flow loss of about 573yuan/mt.

The cash flow of outsourced MTO PP or imported propylene-based PP has been in continuous loss, and the cost pressure of enterprises is relatively high. Since 2023, the average cash flow loss is about 798yuan/mt and 640yuan/mt, respectively. Recently, with the large drop in methanol and imported propylene prices, the cash flow has improved slightly, but there is still a long way to go to profitability.

Overall, the current profitability situation is PDH > oil-based > propylene polymerization > MTO.

Of course, the above results are theoretical values calculated based on the price of homo PP raffia in East China and the current raw material prices. Considering the actual purchasing cycle and storage conditions, the real situation may deviate from the theoretical calculation to some extent and is for reference only.