Global Polypropylene Market Expected to Grow at a Healthy Compound Annual Growth Rate of 4.5% during the Forecast Period

Thursday 27 June 2013, Amsterdam

Global demand for polypropylene in 2000 amounted to 25,107,534 tons, increasing to 42,302,126 in 2011. Global demand for polypropylene has increased over the last decade due to increased consumption by enduse industries worldwide. The packaging industry was the largest end-use segment in 2011, when it accounted for around 30% of global polypropylene demand. The equipment and facilities industry demonstrated the second highest growth rate in terms of polypropylene demand during this period. Geographically, the Asia-Pacific region dominated demand growth in the global market, while the highest growth rate was demonstrated by the Middle East and Africa region, where demand for polypropylene increased exponentially between 2000 and 2011. North America was the only region where polypropylene demand registered a net decline.

During the forecast period, polypropylene demand in North America is expected to recover, whereas the Eurozone crisis is expected to restrict the future growth of the market in European countries. The increasing trend of polypropylene demand in Asia-Pacific and the Middle East and Africa is expected to continue in future, with the Asia-Pacific region expected to account for a 62.2% share of global demand in 2020, which is expected to have reached a total of 62,412,550 tons.

China and India to Lead Global Polypropylene Demand Growth During Forecast Period

At a global level, polypropylene production and demand were dominated by developed countries in the early 2000s. An expanding population base, improving lifestyle, rapid industrialization and economical robustness have resulted in the substantial growth of polypropylene demand in the developing markets of the Asia-Pacific region. China has emerged as a global leader in terms of polypropylene production and consumption, while the relatively developed markets of South Korea and Japan already accounted for majorshares. A similar growth pattern has been observed in the Indian polypropylene market.

China and India are expected to generate more than 12m tons of demand during the forecast period from 2011 to 2020. This is expected to be equivalent to more than 84% of regional demand growth and more than 63% of global demand growth expectations for polypropylene during the same period. Packaging  is still expected to  be the largest contributor to  demand growth, although other end-use segments  are also expected to boost their polypropylene consumption during the forecast period.

Packaging Industry to Continue to be Dominant End-Use Segment for Polypropylene

The packaging industry was the leading polypropylene consumer in the global polypropylene market and accounted for the largest amount of polypropylene market growth between 2000 and 2011. High growth in the retail industry was largely responsible for the high growth of polypropylene consumption in the packaging industry. Other industries, such as electrical, equipment and facilities, and household appliances, also registered substantial growth in polypropylene consumption, and contributed to the growth of global polypropylene demand between 2000 and 2011.

The packaging industry is expected to continue to be the leading end-use industry in terms of polypropylene consumption at a global level. Substantial growth expectations from the retail industry and changing lifestyles are driving the growth of the packaging industry. The growth of the packaging industry is expected to  drive  polypropylene  consumption  at  a  global  level.  The  equipment  and  facilities  industry  and  the electrical industry are also expected to register high growth in terms of polypropylene demand during the forecast period. However, the contributions that are expected to be made by these industries are still expected to be lower than that made by the packaging industry during the forecast period.

Changing Petrochemical Feedstock Dynamics and Fluctuating Oil Prices to Affect Polypropylene Market Adversely

There have been numerous feedstock variations in the global petrochemical market since 2000. The evolution of various new/viable options in the global petrochemical market has changed the scenario of global petrochemical dominance and productivity potential. The availability of inexpensive crude oil in the Middle East, abundantly available coal-based processes in China, and shale gas technology in the US has revolutionized the aliphatic petrochemical industry over the last decade. On the one hand, changes in the Middle East and Asian markets are increasing the cheap supply of propylene. On the other hand, shale gas has diminished the supply of propylene, fueling price hikes in the market. On-purpose technology for propylene was also unable to guarantee that expected demand supply gap could be compensated for.

The shortage of propylene supply and heavy fluctuations in crude oil prices resulted in substantial price hikes in the polypropylene market in the first quarters of 2011 and 2012. These price hikes cannot be easily transferred to polypropylene consumers or end-use markets for polypropylene. If the market stabilizes in line with global economic and political settlement, prices of propylene, and therefore of polypropylene, are expected to come down during 2013 and 2014. On the manufacturing front, propylene price changes between 2000 and 2011, which resulted from tight supply or crude oil price, have had an adverse effect on the  profit  margins  of  polypropyl producers.  Should  this  scenario  continue,  it  may  impede  the development of the polypropylene market during the forecast period.