How will China's polyethylene industry tackle overcapacity Report

Insight 09 April 2024

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Report summary

After massive capacity addition, China's polyethylene industry is expected to muddle through a slowdown with the escalating competition. It is observed that China's domestic operators are actively investing in both EVA and mLLDPE sectors, which are regarded as high-value polyethylene derivatives. The question remains, after another round of investment rally toward both high-end sub-markets, will the growth from those niche markets provide positive return?

Executive summary
- Production of specialised PE grades in China is no longer the obvious pivot for producers
- Background
- EVA
- mLLDPE
China polyethylene muddling through a slowdown with escalating competition
- With 22 Mt of PE capacity set to be added from 2023 to 2030, China’s operating rate will fall
Capacity growth in specialty PE grades is faster than in commodity grades
- Producers are turning to high-end PE derivatives – mLLDPE, POE and EVA – to secure higher margins. EVA is forecast to have the highest capacity growth.
EVA has experienced the strongest growth since 2018
- EVA demand has more than doubled over the past six years
Surging demand from China’s photovoltaic industry has induced EVA demand hike
- While the first half of 2020s is seeing remarkable PV growth, we forecast negative production growth from 2025
Global PV module growth is at risk of entering plateau from 2024
- While first half of 2020s is seeing remarkable PV growth, we forecast negative production growth from 2025
China EVA industry is facing sharply declining operating rates from 2025
- The average operating rate of Chinese EVA production is forecast to decline to 55% by 2027
China mLLDPE highly relies on imports, with limited improvement on domestic production
- mLLDPE is the second largest category among all PE specialty derivatives in China, next to EVA
China Domestic mLLDPE Supply Outlook
China mLLDPE is estimated to have 2.1% CAGR growth till 2030