A study by an international consultancy firm showed that the petrochemical sector in China is going to face a downcycle this year. The report expects the industry to encounter squeezed margins in 2020 as new capacity addition come online, causing a supply surge which weighs on chemical commodity prices.
China is expected to have an additional 5.8 million tons/year of ethylene capacity in 2020. The report predicted that China’s ethylene operating rates would go down to 87% this year from last year’s 96%. Meanwhile, propylene operating rates are expected to decline from 82% to 80% over the same period.
According to the study, polyethylene demand is expected to remain robust in 2020. However, the pace of capacity expansion is exceeding demand, which can cause an imbalance in the market. Meanwhile, polypropylene will likely face harsh market environment with a decrease in automotive production and slower economic growth.
China’s paraxylene market is expected to face a supply surge. PX capacity in China grew 36% to 17.2 million tons/year in 2019 and expected to add another 5 million tons/year in 2020. From 2018 to 2019, production increased by 30% to 13 million tons/year. However, consumption growth is expected to slow down to 4.6 this year from 9% last year. The study projected PX utilization rate to fall to 70% as new capacity put pressure on margins.
Tags: AlwaysFreeRegister,Asia Pacific,China,EN ALWAYSFREEREGISTER,English,Ethylene,Northeast Asia,Paraxylene,Polyethylene (PE),Polypropylene (PP),Propylene China petrochemical sector,Petrochemical Industry,Petrochemical industry downcycleJanuary 16, 2020 5:18 PM