Synthetic Resin is a high molecular weight polymer synthesized from chemical raw materials, widely used in fields such as packaging, construction, agriculture, household appliances, and automobiles. The common five synthetic resins include polyethylene (PE), Polypropylene (PP), polyvinyl chloride (PVC), polystyrene (PS), and acrylonitrile butadiene styrene copolymer (ABS).
It is expected that the consumption of synthetic resin in China will be 120 million tons in 2024, with a growth rate of 3.9%; The production capacity reached 140 million tons/year, with a growth rate of 9.8%; The production is 100 million tons, with a growth rate of 7.1%.
The competition in China's resin market is fierce, mainly due to two factors. Firstly, there is a large amount of domestic production capacity investment. Secondly, the resources in the United States and the Middle East are cheap, and after adding tariffs and shipping costs, they still have price competitiveness compared to domestic products. Therefore, in replacing imports, it is necessary to reduce production costs through both high-end and differentiated paths, as well as process optimization.
Yangzi Petrochemical has increased its efforts in the development and production of new high value-added polyolefin products, and has successively completed the production of a batch of new products such as metallocene polypropylene and ultra-high molecular weight lithium battery separator materials.
Global consumption of synthetic resins steadily increases in 2023
In 2023, it is expected that the global synthetic resin production capacity will reach 360 million tons/year, a year-on-year increase of 5.5%; The production reached 280 million tons, a year-on-year increase of 2.8%; The consumption reached 270 million tons, a year-on-year increase of 1.8%, which is 3.1 percentage points higher than in 2022.
The global economy gradually recovered after the COVID-19 epidemic. It is expected that global GDP will bottom out and stabilize in 2023, with a growth rate of 3%. The IMF predicts a GDP growth rate of 1.8% in the United States, 0.9% in Europe, 1.4% in Japan, 4.6% in ASEAN, and 5.3% in China in 2023, with all major economies experiencing positive GDP growth. With the significant rebound of numerous tertiary industries such as catering and tourism, the global service industry PMI (Purchasing Managers Index) has significantly increased, leading to a significant increase in resin consumption.
Global PMI index from 2019 to 2024, annual average trade growth rate of global synthetic resins from 2020 to 2024
The main consumer of synthetic resins worldwide is still in Northeast Asia; Ranked second in North America, but the proportion of consumption decreased from 15% in 2015 to 12% in 2023; Ranked third in Western Europe, the proportion of consumption has decreased from 12% to 9%; Southeast Asia and South Asia followed closely behind, with consumption accounting for 8%. The United States is gradually entering a digital and information-based society, with capital shifting towards artificial intelligence. The flow of capital towards the plastic manufacturing industry is gradually decreasing, and the apparent consumption of local resin is gradually decreasing, which will shift to importing plastic products from other countries. Due to low-carbon transformation and geopolitical conflicts, energy prices have risen in Europe, and local chemical production capacity has gradually decreased, resulting in a decrease in apparent consumption. The consumption capacity of emerging economies in South Asia, represented by India, is steadily increasing. With the transfer of Chinese industries to Southeast Asia, the demand for resin in Southeast Asia is gradually increasing.
In 2023, the global synthetic resin production capacity will continue to increase mainly in Northeast Asia. The proportion of production capacity has expanded from 39% in 2015 to 45% in 2023. In addition to the naphtha route, various routes such as PDH (propane dehydrogenation), CTO (coal to olefins), and MTO (methanol to olefins) have been launched on a large scale, making Northeast Asia a truly expanding center. North America benefits from the shale gas revolution and has a large amount of cheap olefin resources. Producing polyolefins is a better choice for the United States, with its production capacity accounting for 16% of the world's total, ranking second in the world. Due to rising energy costs, the proportion of production capacity in Europe has decreased from 13% in 2015 to 9% in 2023.
In 2023, China's synthetic resin has seen strong capacity expansion and narrowed profits
In 2023, the supply growth rate of China's synthetic resin consumption market far exceeded the demand growth rate. According to data from the National Bureau of Statistics, the total production of plastic products in China from January to September 2023 was 54.38 million tons, a year-on-year decrease of 0.6%. Due to the large number of small and medium-sized enterprises in plastic product enterprises, they have not been counted by the Bureau of Statistics. Based on the production capacity and import and export statistics of resin production enterprises, it is expected that the apparent consumption of resin will be 111.69 million tons in 2023, a year-on-year increase of 5.8%; Production reached 97.9 million tons, an increase of 9.2%; The annual production capacity reached 128.76 million tons, an increase of 12.8%. Although the growth rate of consumption has increased from -1.3% in 2022, it is slightly lower than the high growth rate of GDP before the COVID-19 epidemic.
Consumption and growth rate of synthetic resins in China from 2021 to 2024
In 2023, real estate and exports dragged down the growth rate of resin consumption, while service industries such as catering and tourism strongly boosted resin consumption.
The consumption of resin related to real estate accounts for about 15% to 20% of the total resin consumption. The decline in real estate growth rate will suppress the consumption of products such as pipes, cable materials, household appliances, and woven bags. The growth rate of real estate investment in 2023 was -7%, greatly dragging down the growth rate of resin consumption.
Another major factor dragging down resin consumption is sluggish exports, with a large number of labor-intensive plastic products in China's export products, accounting for about 30% of the total resin consumption. China's resin exports are expected to decrease by 2.5% year-on-year in 2023.
The proportion of Chinese products to imported synthetic resins from Europe and America
In 2023, there will be a surge in tourism, with tourism revenue reaching 5 trillion yuan. The consumption of catering, transportation, clothing, and daily necessities related to tourism has all increased year-on-year. It is expected that the national tourism consumption will increase by 8% throughout the year, effectively driving the growth of resin consumption.
In 2023, China's resin production capacity investment is still huge, with a large number of enterprises such as Hainan Refining and Chemical, Guangdong Petrochemical, Dongguan Juzhengyuan Technology, and Jingbo Petrochemical putting into operation. The production scale of polyolefins alone is as high as 7.75 million tons/year, of which 4.9 million tons/year is for polypropylene. Many non naphtha routes such as PDH and CTO have also been put into large-scale production capacity. In 2023, resin production increased by 8.24 million tons, but the demand increment was only 6.13 million tons. Strong supply and weak demand, with supply increment far exceeding demand increment. In addition, the average price of Brent crude oil in 2023 is about 83 US dollars per barrel, still at a high level. The demand for resin is low, and costs cannot be smoothly transmitted downstream, resulting in a narrowing of profits for resin production enterprises, reaching a five-year low.
In 2023, the import scale of domestic resins will significantly decrease. Taking polyolefin, the largest import scale, as an example, the import volume is expected to decrease by 7.5%, with polyethylene decreasing by 6% and polypropylene decreasing by 13.1%. There are three reasons for the decline in resin imports: firstly, the US dollar interest rate hike has led to the continuous depreciation of the Chinese yuan, thereby suppressing product imports; The second is a significant increase in domestic resin production capacity, replacing overseas imports; Thirdly, domestic demand is sluggish, leading to a decrease in demand for high-end overseas resins.
In recent years, with the expansion of China's production capacity and the rapid development of plastic modification business, the scale of plastic exports has gradually expanded, mainly focusing on PP exports.
Global synthetic resin consumption growth rate returns to normal track in 2024
With the end of global monetary policy tightening and the easing of inflationary pressures, it is expected that the global GDP growth rate will be 3% in 2024. After the risk of stagflation is lifted, trade activity will bottom out and rebound. In addition, countries such as the United States and India will hold elections, and rulers will introduce policies to stimulate economic growth. Affected by interest rate hikes and geopolitical conflicts, the eurozone economy is expected to experience a deep downturn in 2023. However, as the eurozone quickly guarantees short-term energy supply and the interest rate hike cycle ends, the eurozone economy is expected to experience a slight rebound in 2024. It is expected that the GDP growth rate in the eurozone will increase to 1.5% in 2024. With the recovery of global trade, ASEAN economic growth will slowly recover. Although the growth rate is limited, the growth resilience is relatively strong, and it is expected that ASEAN GDP growth rate will be 4.5% in 2024.
Under the influence of numerous positive factors, it is expected that the global synthetic resin production capacity, output, and consumption in 2024 will be 370 million tons/year, 290 million tons, and 280 million tons, respectively, an increase of 3.8%, 4.2%, and 3.5% compared to 2023. Northeast Asia is still the main force of consumption and consumption increment. With the continuous promotion of agreements and initiatives such as the "Regional Comprehensive Economic Partnership (RCEP)" and the "the Belt and Road", the vitality of the Asian market will be stimulated. Asia will not only be the world's factory, but also the world market. In terms of demand increment, the top three regions are all from Asia, namely Northeast Asia, South Asia, and Southeast Asia, accounting for a total of 74% of the global demand increment, which is 47%, 18%, and 9%, respectively. RCEP will activate the Asian market with a large population, help promote the formation of free trade zones in China, Japan and South Korea, China and ASEAN, China Australia, China and Singapore, and promote the construction of the "the Belt and Road", which will benefit the development of markets in Southeast Asia and Central Asia. At present, ASEAN has become China's largest trading partner. In 2022, the trade volume of petrochemical products between China and ASEAN reached 157.2 billion US dollars, an increase of 20.1% from the previous year, reaching a historical high. It is expected that the trade volume will continue to increase significantly in 2024. Meanwhile, India's economic growth rate has been very high in recent years and may become the next engine of economic growth, with resin consumption also rapidly increasing. In addition, the per capita consumption of resin in the Asian region is generally low, and there is a huge demand for resin products in infrastructure, packaging, daily necessities, and other fields. Due to the wide application of resin products, the growth rate of consumption will be higher than that of synthetic fibers and synthetic rubber.
It is expected that the global synthetic resin production capacity will increase by 13.77 million tons in 2024 compared to 2023, with a growth rate of 3.8% and a decrease of 1.7 percentage points compared to 2023. The production capacity investment will mainly be concentrated in Northeast Asia, accounting for 84% of the global production capacity increment. From the perspective of total production capacity, the world's top five synthetic resin production capacity is expected to reach 37.599 million tons/year in 2024. The top three regions are Northeast Asia, North America, and the Middle East, while Western Europe ranks fourth. From the perspective of production capacity structure, the proportion of polyolefins is still 70%, with polypropylene increasing by 1 percentage point to 32% and polyethylene decreasing to 38%.
In 2024, the global synthetic resin trade growth rate increased to 3.2%, an increase of 3 percentage points compared to 2023. Firstly, with the improvement of the global economy and China's industrial transfer to Southeast Asia and India, Southeast Asia and India are importing more resin from China, North America, and the Middle East. Secondly, although the EU is the second largest chemical production region in the world, its production capacity and market share are decreasing year by year due to low-carbon energy transformation, oil and gas shortages, geopolitical conflicts, and other factors. The long-term supply of petrochemical products in Europe, especially in Western Europe and Central and Eastern Europe, has created market space for exports from the United States and the Middle East to Europe.
The consumption of synthetic resins in China will slightly increase in 2024
It is expected that the consumption of synthetic resin in China will be 120 million tons in 2024, with a growth rate of 3.9%; The production capacity reached 140 million tons/year, with a growth rate of 9.8%; The production is 100 million tons, with a growth rate of 7.1%. The growth rate of production capacity is still higher than the growth rate of demand.
The growth in domestic demand for synthetic resins in 2024 comes from fields such as automobiles, household appliances, and packaging.
In terms of automobiles, sales are expected to break through the 30 million vehicle mark for the first time in 2024, with both domestic and external demand working together to reach 30.58 million vehicles, a year-on-year increase of 5.8%. Based on the strong export momentum in 2023 and the judgment that the positive force of exports will be greater than the negative force in 2024, it is expected that the scale of automobile exports will further increase to 4.9 million vehicles in 2024, achieving a growth of nearly 13%.
In terms of home appliances, the domestic home appliance market demand has increased, and home appliance exports have rebounded, but they are still dragged down by the European and American real estate markets. The expansion of domestic real estate completed area and the recovery of sales area are favorable for the demand for household appliances. The "guaranteed delivery of buildings" in 2024 will gradually drive the growth of demand for related household appliances, providing greater opportunities for domestic household appliance consumption and driving the consumption of EPS (expanded polystyrene), PS, and ABS; The development of smart and green home appliances will become a new characteristic of the industry. In 2024, there is still an opportunity for home appliances to go to rural areas, and the demand for renewal and replacement as well as new purchases is expected to be released. In the past decade, refrigerators, washing machines, and other items that have rapidly become popular in rural areas have gradually entered a period of renewal and replacement; The demand for air conditioning varies greatly between urban and rural areas, with some room for growth; The demand for urban household appliances is mainly focused on updating and replacing, and intelligent transformation is a potential opportunity point. The above areas are expected to release some resin inventory pressure. The export of household appliances has rebounded but is still dragged down by the European and American real estate markets. The export of household appliances has rebounded compared to 2023, and may expand the scale of the export markets of household appliances in Russia and BRICS countries, thereby alleviating the pressure of shrinking profits for enterprises; The European and American real estate markets are being suppressed by high interest rates, and it is expected that demand will remain weak in 2024.
The packaging industry is expected to slow down its growth rate, but it remains the main area of market consumption growth. The packaging industry has benefited from the overall rebound in consumption: From the three historical rebounds in consumer confidence, the stabilization and recovery of exports and real estate have helped boost consumer confidence. It is expected that the nominal growth rate of income will accelerate in 2024, driving the recovery of income and consumer confidence; Plastic packaging accounts for about 25% of packaging materials, and revenue growth and high consumption will continue to drive the plastic packaging market. The packaging industry is greatly affected by the secondary and tertiary industries: in the short term, the service industry will remain high after the COVID-19, the catering and postal transportation will continue to develop well, and the packaging industry downstream related plastic manufacturing industries (soft drinks, food, medicine, etc.) will be stimulated; The slow recovery of industry, in the long run, the improvement of manufacturing competitiveness and the narrowing of the gap with the service industry may benefit the operation of upstream packaging product enterprises and the production of midstream plastic and amorphous products in the industry. The express delivery and food delivery industry has a high demand for packaging raw materials: in recent years, the growth rate of the express delivery and food delivery industry has slowed down, but compared to other industries, it still shows double-digit growth; The online e-commerce market is driving the continuous growth of demand for plastic and other packaging in the express delivery industry; Due to the relative saturation of the food delivery industry, the growth rate of food delivery business is expected to decline, and the growth rate of demand for chemical materials such as PP and PE slows down, but the demand remains strong.
The main drag on the consumption of synthetic resins is the real estate industry, but the degree of drag is decreasing. The real estate industry still has the potential to purchase houses in 2024, but it is still in a downward bottoming stage: inferred from the population size, the adjustment period of the real estate industry has not yet ended, but the proportion of people willing to buy houses has continued to rise from the cyclical low point of 2022, and the decline in real estate investment has narrowed, and the mortgage interest rate on housing has dropped to a new 10-year low. Stabilizing the real estate market through government and financial regulation, as well as self rescue by enterprises: Major real estate enterprises have faced continuous financial pressure, prompting the government to issue policies and increase industry market regulation efforts; Policies such as lifting purchase restrictions and reducing down payments in various regions to maintain stability in the real estate industry; Leading real estate companies are accelerating sales and optimizing marketing to revitalize assets. The rapid recovery of completed residential area provides support for the front-end and back-end chemical products of real estate. With a significant increase in completed real estate area, the first purchase of houses will also experience growth due to policy adjustments, promoting the growth of commercial housing transaction volume; The demand for real estate backend chemical raw materials such as plastics, polyurethane, and synthetic fibers has also increased; The demand for front-end chemical products in real estate will lag behind the growth of back-end products, and the demand for chemical application products such as front-end concrete, coatings, and insulation materials is expected to increase.
In 2024, the synthetic resin production capacity was invested with 12.59 million tons per year, an increase of 9.8% compared to 2023. The main reason is that many of the production capacity that was not put into operation in 2023 is concentrated in 2024. The production capacity of polyolefins alone has reached 9.35 million tons per year, an increase of 1.6 million tons compared to 2023.
It is expected that polyolefins will account for 60% of the five major synthetic resins by 2024. Among them, the PE production capacity is 35.09 million tons/year, and the PP production capacity is 40.79 million tons/year. The production capacity of the five major synthetic resins has increased by 9.8%, but the demand growth rate is only 3.9%, resulting in a serious mismatch between supply and demand.
In 2024, domestic synthetic resin competition will be fierce, which will inevitably compress profit margins. Enterprises should reduce costs by enhancing their digital capabilities, increase product prices through high-end and green technologies, expand market demand through internationalization, and ultimately increase their profits.
