The rapid expansion of China’s polypropylene (PP) capacity in recent years has led to an overabundance of production. China’s capacity of 20mn t in 2015 represented 28pc of the global capacity. Since then, more than 3mn t/yr has been added on average to reach 48mn t in 2024. Argus forecasts that 23mn t will be added in the next 10 years and that by 2034 almost half of global PP capacity will be in China.
This expanding capacity continues to put pressure on operating rates, which peaked in 2020 at 92pc, dropping to 78pc in 2024. Argus predicts rates will bottom out at 70pc in 2027. Many small and outdated plants are expected to shut down — an average of 1.8mn t/yr of rationalized capacity is forecast in 2026-31.
The global uncertainty caused by tariffs between the United States and China has also affected China’s PP production. While PP trade between the two countries is minimal (1pc of China’s PP imports came from the US in 2024, and even less of the US’ PP imports came from China), China’s 125pc reciprocal tariffs to US in April caused a shortage of US-imported propane to China. Around 30pc of China’s PP production comes from propane dehydrogenation (PDH) plants that rely on propane as a feedstock and almost 60pc of China’s propane came from the US in 2024. Based on Argus’ calculations, PDH operating rates dropped from 67pc to 60pc in only one month, representing 0.14mn t of lost production before the trade agreement was reached on May 12.
Despite the tariff disruptions, the overall supply of PP in China should be sufficient. New plants coming on line this year will bring 6mn t of new PP capacity, extending the already oversupplied market by several years. The preliminary US-China trade agreement secures the supply of US-origin propane for 90 days. However, for PDH plants that have shut down already, the cost of restarting, weak margins, and ongoing production creates uncertainty and concerns for domestic producers. Some producers may choose to remain shut down until a longer-term trade agreement is made.
As China’s PP market has matured, fierce domestic competition and external macroeconomic instability are increasingly bringing new obstacles and pressures to the industry. As the tariff issues are still in a waiting period, PP producers will need to continuously monitor the market and adjust their strategies in order to remain competitive.
The data used in this article comes from the Argus Polypropylene Analytics service.
