Polypropylene producers bank on Asian automotive demand to guard against heavy competition

Producers are moving toward polypropylene impact copolymers and other higher value PP for automotive applications, banking on rising automobile demand in Asia to lift profits, as the market for commodity grade PP homopolymers becomes increasingly competitive, as per industry sources in Platts. Japan's Mitsui Chemicals and Prime Polymer, in which Mitsui Chemicals has a 65% stake, announced plans to raise its global PP compound capacity by 5% to 1.05 mln tpa by fiscal 2017 (April 2017-March 2018) in response to growing demand from the automotive sector, in a joint press release earlier this month. Production capacity in Asia, excluding Japan, is expected to increase 5.7% to 280,000 tpa while in North America, capacity is set to expand by 7.3% to 440,000 tpa, according to the release. Saudi Basic Industries Corp.'s executive vice president of polymers Abdulrahman Al-Fageeh said: "We have shifted some of our portfolio in our local production [from homopolymer to copolymer] here in Sinopec Sabic Tianjin Petrochemical [SSTPC] to cope with [China's automotive] demand." SSTPC is a 50:50 joint venture between Sabic and Sinopec with a nameplate capacity of 450,000 m tpa of PP and 600,000 m tpa of polyethylene. In Southeast Asia, PP demand from the automotive sector remains a bright spot, said Thailand's IRPC in April during the Chinaplas 2016 conference. IRPC has invested heavily in a 100,000 m tpa PP plant at Rayong using compounding technology licensed from Japan Polypropylene Corporation, or JPP, suitable for automobile bumpers and instrument panels, company sources said. The plant is expected to start up in end-2017. Thailand is a key PP exporter to China. China's automobile demand is expected to grow by 1.4 mln units in 2016, or up 7% year on year, to around 21.4 mln units, according to Scotiabank's 2016 Global Auto Report, outpacing demand growth rate of 4% to 33.6 million units across Asia this year. So far, growth in China's automobile sales has broadly been in line with Scotiabank's forecast. Between January and April, sales in China grew 6.1% year on year to 8.7 mln units, according to China Association of Automobile Manufacturers (CAAM). Chinese production grew by 5.7% to 8.8 million units over the same period, roughly in balance with demand. Revenue figures provided more evidence of demand growth in 2016, with sales for the first four months rising 7% to about US$181 billion from the same period last year, according to latest data from China's National Bureau of Statistics.