China faces PP, PE supply overhang in Q1 amid planned start-ups

According to latest update Chinese polyolefin sector is bracing for an astonishing amount of capacity additions. Data show that a huge amount of polyolefin capacity has been delayed from December 2022 to the first quarter of 2023, prompting expectations of increased competition for market share among producers and consequently lower prices.

Several PP and PE manufacturing plants –primarily located in coastal cities across eastern and southern provinces– are scheduled to come online during the course of the first quarter, following a slight delay from the initially scheduled year-end.

In the PP market, around 2.6 million tons of capacity was scheduled to come online in December and this has been delayed to the first quarter. The cumulative PP capacity expected to start up in the first quarter now totals more than 4.5 million tons/year, corresponding to nearly 40% of total PP capacity additions scheduled for the full 2023 in China.

As for PE, nearly 2.5 million tons/year of new capacity has been delayed to the first quarter of 2023. This corresponds to nearly half of the total capacity slated to come online this year.

Chinese producers have been running their plants at reduced rates almost since the second quarter of 2022 , aiming to balance local supplies with ebbing demand, and also to mitigate the pressure from higher production costs. Players largely expect PP and PE producers to continue to keep run rates low throughout the first quarter to help offset the impact of the approaching plant start-ups on prices.