Global polypropylene demand in 2009 was 36.5 million tons, with the packaging industry holding the largest share at 54 percent, followed by the automotive industry with a share of 15.6 percent, GBI Research, a leading provider of global business intelligence including market, competitor, product and customer information, said on Thursday. The top 10 global polypropylene company list has one Middle East and one Asian company in SABIC in Saudi Arabia and Sinopec in China. These two companies together accounted for 11 percent of the $69,516 million global PP market in 2008. SABIC has grown to be top producer of polypropylene with acquisitions of DSM Petrochemicals and plastics division of General Electric, giving it access to developed markets of Europe and North America. Other Middle East based producers will follow SABIC's strategy of leveraging the domestic cost advantage to tap export markets. Sinopec accounts for over 90 percent of the Chinese polypropylene production, and with the Chinese demand projected to grow by more than 10 percent annually till 2020. The company will continue to maintain its market dominance in China. In other Asian countries, a similar market structure exists with domestic companies dominating the home markets. The low density of polypropylene makes it suitable for these applications. When used in the automotive industry, it reduces the weight of the vehicles improving fuel efficiency and significantly reducing costs. The recession had a negligible effect on PP demand in the packaging industry because most of the PP is used is in the packaging of food materials; and the consumption of food is not affected by recessions as other industries are. The automotive industry suffered a huge decline in demand due to the recession, but with the global economy recovering, demand from the automotive sector is expected to recover also, boosting PP demand. Polypropylene is produced from propylene which is produced as a byproduct in the production of ethylene. The amount of propylene produced depends on the type of feedstock used -When light feedstock (natural gas) is used; a relatively small amount of propylene is produced. However, when a heavy feedstock (crude oil) is used, a comparatively significant amount of propylene is produced. Due to recent growth in the demand for ethylene derivatives, the industry is shifting towards lighter feedstock. This demand is more prevalent in the Middle East and North America as ethylene and its derivatives produced from lighter feedstock are cheaper and more profitable, making the amount of propylene produced relatively lower. GBI said global PP demand, from 26.6 million tons in the year 2000, grew at a compound annual growth rate (CAGR) of 3.6 percent until 2009, to rise to 36.5 million tons. The global polypropylene demand is expected to grow at a CAGR of 4.6 percent from 2009 to 2020, estimated to reach 59.6 million tons in 2020. Of the total global demand of 36.5 million tons in 2009, Asia held the largest share of 51.9 percent followed by Europe with 22.3 percent. Demand in Asia is led by China and India - the hugely populated, fastest growing economies of the world in terms of GDP. Per capita PP consumption in India is very low but it is growing very fast with the GDP growth. The per capita PP consumption in China is high but continues to increase at a very high rate to satisfy the needs of the country's huge population. The share of Asia in the global PP demand is expected to grow until 2020. Over the past decade, China has emerged as the principal manufacturing and export location for low value plastic products in the world due to low manufacturing costs and significant government support. Rapid increase in downstream processing capacity additions, primarily geared towards export markets, will be the main driver of PP demand in the future. With over 30 percent of the demand dependent on imports, China will continue to remain the largest importer of PP in the world, in spite of the many capacity additions expected to come on-stream in the next few years. The Chinese PP market size was $14,439 million in 2008 and is forecast to grow by more than 10 percent, accounting for 41 percent of the global PP demand in 2020. Companies from Asia and the Middle East will come to dominate the future global market as technology leadership gives way to market leadership and resource leadership. PP producers from Asia dominate their home markets and with maximum demand growth expected to come from this region, Asian companies are ideally positioned to capture the significant part of the demand growth. The Middle Eastern producers, with access to lower cost feedstock and proximity to Asian countries, will emerge as the main suppliers of polypropylene to the Asian markets. Production of polypropylene in most countries will be unable to compete with the Middle East production as feedstock costs of these producers are 20 percent of the cost of feedstock available to Asian and European producers. The Middle Eastern countries, in their need to diversify from dependence on oil revenues, support the growth of petrochemical industries to add value to their exports and also to generate employment for local citizens. This region will see over 3 million tons of PP capacity additions in the next few years that will account for over 50 percent of the global planned PP capacity additions. As a result, the Middle East region will emerge as the largest exporter of polypropylene in the world. Over 30 percent of the global polypropylene demand comes from developed markets of North America and Europe and the demand from these two regions is expected to remain stagnant going to 2020. Demand growth in North America will be stagnant as the economy goes into recession in 2009 and the economic outlook for the next few years is bleak. The absence of capacity additions in the downstream processing sectors is the single most important reason for demand stagnation in the region. North America accounted for 14 percent of the global polypropylene demand of US$69,516 million in 2008, and according to the estimates, it will account for 9 percent in 2020. Lack of strong demand drivers from large economies like France and Italy is the main reason for demand stagnation in Europe. The growth from Spain and Germany will not offset the decline in demand from the traditionally large consuming countries of France and Italy. Europe accounted for 17 percent of the global polypropylene demand of US$69,516 million in 2008, and according to the estimates, it will account for 11 percent in 2020. Variations in the supply of propylene affects the prices of both propylene and polypropylene, therefore, propylene supply shortages can prove to be a major hindrance to the growth of the polypropylene industry. The demand for PP in packaging applications has the best growth potential among the various end-use applications. This sector has been relatively less affected from the recession compared to sectors like automobiles and construction. Continuous innovation in packaging applications is helping replace traditional packaging materials with polypropylene. Food packaging, which accounts for over 70 percent of all the packaging applications of polypropylene, is driving demand for packaging in developing and developed countries alike. The sector accounted for 56 percent of the global polypropylene demand of $69,516 million in 2008 and according to the estimates; it will continue to be the market with the greatest potential and will grow 9 percent pa to account for 58 percent of the global PP demand in 2020. Polypropylene in packaging applications is driven by retail sector and this sector will register growth in all the major regions of the world. Demand from automotive application has the next best growth potential and currently accounts for 12 percent of the $69,516 million global PP market. Driven mainly by growth in developing markets of Asia, Latin America and Middle East, demand from this sector is projected to grow by over 8 percent to account for 11 percent in 2020. The global PP industry is currently dominated by North American and European producers and this is due to their domination of home markets and technological advantage. Faced with demand stagnation in home markets and competition from the Middle Eastern producers, most of the major Western producers will look to exit the polypropylene business and concentrate on specialty and high value polymers.
