In the upcoming year of 2024, the commodity market remains complex and volatile due to factors such as differences in monetary policies among countries, widening geopolitical rifts, and the rise of trade protectionism. Among them, the general plastics industry, as a member of the petrochemical industry chain, is more susceptible to upstream uncertainty transmission. At the same time, China's plastic industry has been in a stage of rapid expansion in recent years. In the post pandemic era of slowing global economic growth, whether domestic related industries can rise against the trend and the market trend will be geometric. This forecast report will take you ahead on the direction of China's general plastics industry in 2025.
General plastic products mainly include polyethylene (PE), polypropylene (PP), polyvinyl chloride (PVC), polystyrene (PS), and acrylonitrile butadiene styrene copolymer resin (ABS). Although its connotation and members may change with the development of science and technology, the core commonality of its "universal" name lies in its wide application, low price, and large output. Whether as a necessity for daily life, in industrial production, or as a financial product, it holds an irreplaceable and important position, hence it is also known as a bulk plastic variety.
The plastic market in our country has a huge consumer demand. Since the beginning of the new century, the domestic plastic industry has achieved leapfrog development, with significant progress in product types and output. Especially in the past five years, according to statistics, the total production of primary form plastics in China exceeded 1 trillion tons for the first time in 2020. From 2020 to 2024, the average annual production growth rate will remain above 5.14%, maintaining its position as one of the world's major plastic production bases with a global proportion of 33%. If this growth rate is maintained, it is expected that by the end of 2025, the annual production of primary form plastics in China may reach 131.5174 million tons.
With the increase of production capacity and output in our country, the domestic demand gap for plastics is gradually being met, and the degree of dependence on imports is also decreasing year by year. As of the end of 2024, China has maintained negative growth in primary form plastic imports for four consecutive years. And in the imported categories, the domestic substitution rate of basic plastic categories is high, while the domestic substitution rate of high-end categories is low. Based on this negative growth trend, it is estimated that the import volume of primary form plastics in China for the whole year of 2025 may not exceed 28.544 million tons.
From the perspective of domestic downstream consumption structure, in the first half of 2024, plastic downstream enterprises in China produced a total of 36.2583 million tons of plastic products. Among them, the consumption of thin film accounts for 24%, and the output is as high as 8.702 million tons; Next is 2.829 million tons of daily plastic products, accounting for approximately 7.8%; The remaining nearly 70% of the plastic products market is occupied by synthetic leather, plastic weaving, building materials, and other plastic products. The overall distribution of consumption shows a pattern of one super strong and many strong, and the industry consumption is generally healthy and stable. The domestic demand side shows certain resilience attributes.
Challenges and Opportunities
Potential for Demand Growth and Rapid Industry Expansion
Despite the impact of the COVID-19 pandemic in 2019, downstream demand for general plastics has continued to move forward with resilience amidst fluctuations in recent years. According to statistics from the Ministry of Industry and Information Technology, from January to November 2024, the national plastic products industry produced 69.866 million tons, a year-on-year increase of 3.3%. The steady growth of traditional plastic product consumption in China and the opening up of the emerging plastic industry track will bring profound growth potential to the domestic general plastic industry.
In recent years, China's general plastic production capacity has expanded rapidly. According to relevant investment and construction plans, the expansion rate of PE, PP, and PS will all be over 22% by 2025, and ABS will reach as high as 44.86%. By the end of the year, the newly added production capacity of various varieties is generally higher than the total production capacity in 2024. The short-term domestic demand growth rate is difficult to keep up, resulting in a temporary mismatch between production and sales. And from 2025 to 2029, it will be the second high-speed expansion cycle of China's plastic industry, indicating that the domestic market will be challenged by the mismatch between supply and demand growth rates from time to time in the next five years.
Expansion of Export Markets and Fluctuations in the Foreign Trade Environment
The enhancement of international competitiveness of domestic plastic enterprises is another achievement of the development of China's plastic industry. With the increase of domestic plastic foreign trade windows, more and more plastic companies are choosing to further explore emerging overseas markets. According to statistics, the export value of plastic products in China has reached 78.021 billion US dollars in the first three quarters of 2024 alone, and the export value for the whole year of 2023 is 100.809 billion US dollars, which has almost tripled compared to ten years ago and has become one of the major plastic exporting countries. Expanding export markets and hitchhiking on the growth of foreign economies is undoubtedly an emerging blue ocean field for China's plastic enterprises.
At the same time, we can also see from customs statistics that China's plastic product exports will experience a negative growth of 3.9% in 2023, ending seven consecutive years of rapid progress. The strong upward trend being paused is not without warning. The World Economic Outlook report released by the International Monetary Fund and the Global Trade and Development Report 2024 by the United Nations Conference on Trade and Development (UNCTAD) both point out that global trade activity is shrinking and economic recovery is slow. The factors causing the year-on-year decline in China's plastic product exports in 2023 are not only objective factors such as reduced external demand, but also human factors such as the rise of trade protectionism led by the United States. As is well known, US President Trump, who is known for his habitual trade war tactics, will begin his second term in office in 2025, and the uncertainty of the foreign trade environment is expected to inevitably rise. Plastic colleagues need to overcome difficulties and provide support for domestic plastics going global.
Industrial upgrading and geopolitical conflicts and disturbances
Since 2016, China's general plastics industry has entered a new stage of high-quality development. Enterprises are paying more attention to extending into the upstream raw material field and expanding into the downstream product processing field. The process of industrial integration is constantly accelerating, and the comprehensive quality of Chinese plastic enterprises is improving year by year. This industrial integration model has advantages such as reducing production costs, improving product quality, and enhancing enterprise risk resistance, which can easily form a snowball effect in future competition.
Oil and natural gas are important raw materials for the general plastics industry, but in recent years, due to geopolitical conflicts, international energy price premiums have become more common. Due to China's resource endowment of poor oil and gas, the cost pressure of the general plastics industry largely comes from imported oil and gas. Against the backdrop of uncertain situations in the Middle East and Europe, the production and sales of bulk plastics in China in 2025 will become even more uncertain.
Outlook and Prediction
Price forecast
According to the Commodity Market Analysis System of SunSirs, as of the end of 2024, the price fluctuations of the five major general plastics in China are generally narrow compared to the beginning of the year, with a total of three products experiencing an increase and two products experiencing a decrease. The General Plastics Index is 850 points, up 30.168% from its lowest point of 653 points on April 6, 2020. SunSirs predicts that by 2025, the growth points of domestic general plastics will continue to revolve around the deep cultivation of traditional plastic product consumption and the development of emerging plastic fields such as new energy vehicles. The steady progress of domestic demand for general plastics determines that the price market will gradually rise in the long run. However, compared to production capacity, the lagging growth rate of consumption may lead to a sluggish unit price in the short to medium term. Therefore, it is expected that a sharp rise in the market in 2025 may be difficult, and the industry will continue to operate in a low profit mode.
Production increase without incremental warning
With the rapid increase in production capacity in recent years, the temporary oversupply situation has gradually deepened. The cost pressure on plastic companies is difficult to transfer, and there is an increase in industry off peak production, production cuts, and shutdowns. The ABS and PS similar market trends are more evident in 2024, with industry average operating rates of 64% and 57% respectively. Although production can be tightened through industry self-regulation, other chain reactions such as increased losses, rising maintenance costs, and decreased profitability cannot be avoided. The supply and demand pattern in 2025 will inherit the pattern in 2024, and businesses and investors should be alert to this market expansion that does more harm than good to enterprises and industries.
Long term outlook
At present, some domestic plastic companies have certain production technology and scale of modified plastics, but the proportion of plastic modification applications in China is still less than 25%, and far below the current global plastic modification rate of 50%. In the long run, there is enormous room for improvement in the modification rate of China's general plastics industry in the future. With the gradual completion of the high-speed expansion stage of basic categories for domestic plastic enterprises around 2029, the focus of industry development will inevitably shift to high value-added projects.
Looking back on the past, there is still a beauty that has not been fully realized. Looking ahead to the future, there is still great potential.
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