New production capacity exceeds 10 million tons, but it is difficult to change the situation of oversupply and weak demand.

(Source: China Chemical Information Weekly)

Keywords | Propylene capacity surges by a whopping total of 4,855 words | Recommended reading time: 12 minutes

Propylene is an important basic chemical feedstock, mainly used to produce chemical derivatives such as polypropylene, acrylonitrile, and propylene oxide. Propylene production processes mainly include catalytic cracking technology (FCC) for producing propylene as a gasoline byproduct, the technology of co-producing propylene in cracking units, propane dehydrogenation technology (PDH), and methanol-to-olefins technology (MTO/MTP, CTO/CTP) using natural gas or coal as feedstock, among others.

In recent years, the propylene industry has seen strong overall growth, driven mainly by rapid development in developing countries. During the “14th Five-Year Plan” period (2021–2025), global propylene capacity will continue to grow. In China, the pattern of propylene supply exceeding demand will persist, and competitive dynamics will become even more intense. Of particular note is the supply-demand imbalance that the large downstream bulk products of propylene will directly face: supply-side pressure will become more prominent while demand growth remains relatively weak. Profit margins will be continuously compressed, and related companies may even face losses in a certain period.

Review of the Propylene Industry in the “14th Five-Year Plan” Period

Global: Strong overall growth

During the “14th Five-Year Plan” period, driven by rapid development of the propylene industry in developing countries, the global propylene industry saw strong overall growth, and the pricing focus moved downward

Northeast Asia leads the world in rapid propylene capacity growth. During the “14th Five-Year Plan” period, global propylene capacity expansion reached unprecedented scale, with new capacity of about 40 million tons/year, and average annual capacity growth of about 8 million tons/year, which is roughly 3 million tons/year higher than the average annual figure in the “13th Five-Year Plan” period. Among them, Northeast Asia accounted for 35.1 million tons/year of新增 scale, representing 87% of the world’s total新增; North America added only 8.8 million tons/year; and Western Europe shut down 16 million tons/year.

Developing countries lead the world in propylene consumption growth. During the “14th Five-Year Plan” period, except for 2022 when the pandemic occurred, global propylene consumption maintained roughly 3% annual growth on average, but the increase in consumption was clearly lower than the increase in capacity. Polypropylene is the largest downstream derivative of propylene. Influenced by rapid capacity expansion of acrylonitrile and acetone, the share of propylene used for polypropylene declined. Changes in propylene oxide, acrylic acid, and butyl octanol were not significant. Northeast Asia, Southeast Asia, and India-Pakistan become the main engines of propylene demand growth. Mature economies such as Western Europe saw negative growth in polypropylene consumption.

Multiple supply routes expand significantly, and the price focus for propylene shifts downward. During the “14th Five-Year Plan” period, international oil prices showed a trend of peaking first and then falling, which is basically consistent with the trend of propylene prices. Due to supply surging and demand growth slowing, propylene prices in Northeast Asia and Southeast Asia continued to decline after 2022, becoming the lowest-priced regions globally.

China: Explosive capacity growth

The “14th Five-Year Plan” period is the explosive phase for China’s propylene capacity, especially the rapid expansion of the PDH route. However, downstream demand growth lagged behind, laying the groundwork for fierce competition in the “15th Five-Year Plan” period

Kicking off production rush across all routes, with raw materials becoming more diverse. During the “14th Five-Year Plan” period, China’s propylene capacity grew explosively, with added capacity reaching 33.8 million tons/year. The main driving force came from PDH projects funded by private capital. By the end of the “14th Five-Year Plan” period, China’s propylene capacity reached 77.1 million tons/year, 1.8 times the end level of the “13th Five-Year Plan” period. The share of the PDH route increased to 33%, while the share of traditional routes based on refining and naphtha fell to 51%.

Among traditional routes, large-scale refining-chemical integrated and expansion projects such as Zhejiang Petrochemical, Yulong Petrochemical, and China National Offshore Oil (CNOOC) Daxie Petrochemical started production, adding 4.13 million tons/year of propylene capacity from refinery byproducts and 9.87 million tons/year of naphtha-to-propylene capacity.

Non-traditional routes such as MTO and CTO saw slower expansion. New CTO projects mainly came from Ningxia Baofeng, with a scale of 1.78 million tons/year. Some downstream propylene enterprises integrated their development layout and built MTO projects, such as Tianjin Bohai Chemical and Shandong Lianheng, jointly adding 5 million tons/year of capacity.

PDH added capacity reached unprecedented levels, concentrated in the eastern regions. A total of 29 projects, including Fujian Meide, Donghua Energy (Maoming), and Zhenhua Petrochemical, added a combined 19.47 million tons/year.

Polypropylene consumption growth slowed, dragging down propylene consumption growth further. During the “14th Five-Year Plan” period, China’s propylene consumption grew at an average annual rate of 6.1%, down by 2.4 percentage points compared with the “13th Five-Year Plan” period. By the end of the period, annual propylene consumption volume was 63.1 million tons. In recent years, the share of propylene used for polypropylene has been declining; in 2025 it fell to 68%. During the “14th Five-Year Plan” period, China’s net increase in polypropylene capacity was 24.43 million tons/year, but profit margins were severely squeezed, with companies hovering around the break-even line for the long term and operating rates running at low levels. Influenced by factors such as weak downstream demand and serious market homogeneity, polypropylene’s average annual consumption growth during the “14th Five-Year Plan” period was 6%, down 3.3 percentage points from the “13th Five-Year Plan” period. During the “14th Five-Year Plan” period, driven by downstream demand, consumption of propylene oxide, butyl octanol, acrylonitrile, and acetone continued to increase, with growth rates higher than in the “13th Five-Year Plan” period.

Review of the Propylene Industry in 2025 and Outlook for 2026

2025: Supply and demand both accelerate

In 2025, overseas新增 propylene capacity was 1.77 million tons/year, while domestic新增 reached 9.11 million tons/year. The expansion scale was unprecedented. Among them, the PDH route had 4 sets of units with a combined capacity of 2.68 million tons/year brought online, accounting for nearly 29%.

From the demand side, driven by short-term positives such as export rush and “trade-in” incentives, the auto industry’s growth rate rebounded. Home appliances benefited from overseas restocking demand, and their demand growth rate improved somewhat. Industries such as express delivery and food delivery remain in a period of high-speed growth. China’s propylene consumption growth rate significantly exceeded the global rate, rising sharply to 12.7%, and consumption volume increased to 63.1 million tons.

2026: Supply strength, demand weakness—hard to change

In 2026, PDH units including Zhejiang Petrochemical Phase II, large-scale refining-chemical integration projects such as Huajin Aramco, and Fujian Hq. etc. came online, adding 4.71 million tons/year of propylene capacity, and supply pressure continued to increase.

U.S.-style tariff policies (America) are expected to weigh on China’s downstream propylene-product exports. Except for a low-level adjustment in real estate, it is expected that in 2026 the growth rate of vehicle sales will fall to 2.4%, express delivery will maintain growth of more than 20%, and growth in demand for home decoration, home appliances, and furniture will slow down. All of this will drag down polypropylene consumption growth to 4.5%. China’s propylene-equivalent consumption growth is expected to fall to 4.1%, and consumption volume will reach 65.7 million tons.

Outlook for the Propylene Industry in the “15th Five-Year Plan” Period

Global: Capacity growth slows

During the “15th Five-Year Plan” period, global propylene capacity will continue to grow. Asia will still be the fastest-developing region, and global trade volume will increase steadily

Propylene industry expansion will mainly come from Asia. During the “15th Five-Year Plan” period, global propylene capacity net increases by 27.3 million tons/year. Northeast Asia will remain the hottest region. Most of the world’s新增 capacity will come from China, with others from India-Pakistan and the Middle East, etc. Negative growth will occur in regions and countries where plants are shut down, such as Western Europe and Japan-South Korea.

Propylene supply shifts toward PDH dedicated production routes. Overseas, propylene as a co-produced product of refined petroleum products and ethylene means supply mainly comes from two routes—refinery and naphtha cracking—with a small amount from PDH. In North America and Europe, new ethylene production routes mostly choose ethane cracking. The refining industry develops slowly, causing propylene capacity growth to be slow or even to stall. With abundant propane resources, there is room for PDH-dedicated propylene production. Companies in the Middle East, Western Europe, India-Pakistan, and other regions are planning to invest in and build PDH units.

Global trade patterns may change somewhat. During the “15th Five-Year Plan” period, China’s propylene capacity expansion will reduce net import volumes gradually, which will lead to an increase in Northeast Asia’s net export volumes. Demand in India-Pakistan increases relatively quickly, and net imports rise. In Western Europe, older and outdated units will be shut down in the future, while North America will see relatively few new capacity additions. It is expected that by 2030, Western Europe will turn into a net import region. Propylene derivatives from the Middle East will export more to regions such as India-Pakistan and Central Europe.

China: Competition intensifies

During the “15th Five-Year Plan” period, China’s propylene capacity additions will still be huge. Multiple routes will advance in parallel, and oversupply of propylene bulk products will become prominent, while consumption growth rates slow down

China’s propylene capacity increase will continue to outpace demand growth. During the “15th Five-Year Plan” period, China’s propylene industry will continue to develop toward scale and integrated development across the upstream and downstream value chain, with net capacity adding 23.62 million tons/year. By the end of the “15th Five-Year Plan” period, propylene capacity will reach 100.72 million tons/year, 1.3 times the level at the end of the “14th Five-Year Plan” period.

PDH and naphtha-based sources are far more plentiful than CTO and MTO. During the “15th Five-Year Plan” period, China’s propylene routes will continue to diversify, and added capacity will be mainly based on the PDH route and the naphtha route.

Benefiting from lower investment thresholds, lower production costs, and shorter construction cycles, many PDH projects took shape and began operation during the “14th Five-Year Plan” period. During the “15th Five-Year Plan” period, the scale will remain relatively large. There are 10 PDH units under construction or planned, adding a combined 8.42 million tons/year of capacity. The projects are mainly run by private enterprises, and PDH capacity at the end of the period will reach 32.65 million tons/year.

During the “15th Five-Year Plan” period, state-owned enterprises will concentrate on retrofits and expansions, as well as large-scale refining-chemical integrated projects. More of these projects are “turning oil into chemicals” (“减油增化”). Naphtha-based propylene capacity will increase significantly, totaling 9.77 million tons/year.

During the “15th Five-Year Plan” period, coal prices remain low, and the competitiveness of China’s coal-to-olefins routes will remain strong. New capacity will add 3.59 million tons/year. It is expected that by the end of the “15th Five-Year Plan” period, coal-to-olefins scale will reach 13 million tons/year.

During the “15th Five-Year Plan” period, development of MTO will slow down, and 4 sets of units will add a combined 1.35 million tons/year of capacity.

Insufficient drivers for propylene consumption. During the “15th Five-Year Plan” period, due to continued expansion of downstream products including polypropylene, propylene oxide, and acrylonitrile, propylene-equivalent consumption will continue to grow steadily, but the growth rate will slow slightly. Average annual growth will fall to around 3%. From the downstream product structure of propylene, most of the added capacity will be for bulk feedstocks. High-end products such as high-melting fiber-grade materials, high-performance transparent materials, battery separator materials, high-end adhesives, and superabsorbent polymers (SAP) remain in short supply. Propylene-equivalent will still need to be imported.

1. Polypropylene: Capacity expansion slows, and structural oversupply emerges. During the “14th Five-Year Plan” period, polypropylene capacity achieved 1.8 times growth. In 2025, total capacity reached 56.46 million tons/year. Apparent consumption grew at an average annual rate of about 6%, with end-of-period annual consumption volume of 42.89 million tons. The main drivers of polypropylene consumption growth include ongoing advancement of urbanization, steady development of industries such as food-delivery packaging and home appliances, and replacement of old materials with new ones.

During the “15th Five-Year Plan” period, polypropylene will add capacity of 17.63 million tons/year, bringing total end-of-period capacity to 74.09 million tons/year. Added capacity for bulk-grade materials will account for the vast majority, and market competition will become extremely intense, while high-end polypropylene materials will still rely on imports. During the “15th Five-Year Plan” period, polypropylene’s average annual consumption growth rate will slow to about 3.5%, and end-of-period annual consumption will be 51.03 million tons.

2. Propylene oxide: After a big development phase, industrial oversupply worsens. During the “14th Five-Year Plan” period, newly added capacity increased substantially, causing end-of-period supply to become loose. Consumption of propylene oxide terminals grew at a high speed, but by the end of the period profits were squeezed significantly. Slower real estate investment led to weak demand in the terminal household-furnishing industry. Also, dragged down by factors such as the slowdown in the auto industry and an unfavorable trade environment, demand in the polyether downstream sector weakened, with thin profits and the emergence of price competition. High-profit propylene oxide becomes hard to sustain. During the “14th Five-Year Plan” period, propylene oxide’s average annual consumption growth rate was close to 18%.

During the “15th Five-Year Plan” period, propylene oxide profits narrow, and the pace of industrial expansion slows. End-of-period capacity rises to 13.63 million tons/year, increasing by 4.70 million tons/year, and the oversupply situation worsens. Traditional downstream consumption of propylene oxide enters a low-speed development stage. The domestic polyether industry is overall oversupplied, with the soft foam market facing the largest oversupply pressure, and its competitiveness is weak, making it hard to open export markets. In the building insulation industry, due to the lack of entry-and-approval standards, the rollout effect of polyurethane insulation materials has not been good. In China’s white goods industry, the market is almost saturated. Vehicle polyether remains profitable, but the auto industry’s growth rate also fell from double digits in the past few years, seriously affecting the growth potential of the polyether industry. Upgraded energy-efficiency standards for refrigerators and other appliances may accelerate the use of rigid insulation boards, which could substitute some polyurethane insulation demand in the future. Domestic fresh-food cold-chain logistics and renovation of old residential communities will boost consumption of insulation-related products including wall insulation, pipe insulation, and waterproof coatings, becoming highlights for downstream consumption of propylene oxide. During the “15th Five-Year Plan” period, China’s propylene oxide consumption is expected to grow at an average annual rate of around 7%.

3. Acrylonitrile: Capacity grows faster than demand; shifts toward exports. During the “14th Five-Year Plan” period, acrylonitrile capacity continued to grow. In the early stage, acrylonitrile had a supply gap, good profitability, and strong investment enthusiasm, with acrylonitrile capacity reaching 5.55 million tons/year in 2025. Downstream consumption generally formed the “three-way” pattern of acrylonitrile-butadiene-styrene (ABS) copolymers, acrylonitrile fibers, and acrylamide, with the remaining about 10% used in fields such as nitrile rubber, polyether polyols, adiponitrile, and agrochemical intermediates. Acrylonitrile consumption volume in 2025 was 3.6 million tons. During the “14th Five-Year Plan” period, average annual consumption growth was 7.7%.

During the “15th Five-Year Plan” period, the pace of acrylonitrile capacity expansion slows, with capacity increasing to 5.83 million tons/year. Supply becomes even more abundant, and export volumes will increase. Downstream consumption of acrylonitrile continues to grow. The added scale of ABS will decrease significantly. The acrylonitrile fiber industry has developed very slowly in recent years. As environmental protection concepts become more deeply ingrained, acrylamide products will find development opportunities in water-treatment-related industries. It is expected that by 2030 acrylonitrile consumption volume will reach 3.9 million tons, and average annual growth during the “15th Five-Year Plan” period will slow to about 1.6%.

4. Acetone: Flat downstream demand; industry expansion slows. During the “14th Five-Year Plan” period, acetone added capacity was 2.41 million tons/year, and end-of-period capacity reached 4.56 million tons/year; annual consumption was 3.63 million tons; and average annual consumption growth was 11.4%.

During the “15th Five-Year Plan” period, acetone added capacity is 0.65 million tons/year. In China, acetone is mainly used as a solvent, methyl methacrylate (MMA), bisphenol A, and in pharmaceuticals. As environmental requirements increase, the share of solvent-based coatings will decline. Driven by the faster development of polycarbonate and epoxy resins and steady increases in pharmaceutical demand, acetone’s estimated average annual consumption growth during the “15th Five-Year Plan” period is 1.8%.

5. 2-Ethylhexanol (2-EH) / Butyl octanol: Slow demand growth; digest earlier incremental capacity. Butyl octanol capacity is concentrated in areas with dense downstream consumption—Shandong, Zhejiang, and Jiangsu. During the “14th Five-Year Plan” period, capacity grew significantly, with added scale reaching 5.36 million tons/year. As real estate investment slowed, the growth rate of the largest downstream use—n-butyl acrylate—also slowed. Meanwhile, steady growth in polyvinyl chloride (PVC) output greatly stimulates demand for plasticizers. Some butanol units switch to produce 2-ethylhexanol, and 2-ethylhexanol consumption performs relatively well. Butyl octanol’s average annual consumption growth during the “14th Five-Year Plan” period was 7.5%.

During the “15th Five-Year Plan” period, China’s butyl octanol consumption is expected to grow at an average annual rate of 2.4%, with limited capacity additions, continuing to absorb excess capacity. From the downstream consumption of n-butanol, n-butyl acrylate aqueous emulsions become mainstream. Among the main downstream areas, real estate investment slows and the auto industry is sluggish, so demand continues to develop at a low pace. For phthalate plasticizers such as di-n-butyl phthalate, due to toxicity, usage continues to decline. From the downstream consumption of 2-ethylhexanol, in plasticizer demand, restrictions from EU standards gradually reduce the share of dioctyl phthalate (DOP), while the share of dioctyl terephthalate (DOTP), which has higher profits, gradually increases. In international markets, 2-propylheptanol increasingly replaces 2-ethylhexanol, and demand is increasing. Currently in China’s plasticizer consumption areas, demand for 2-propylheptanol is very small, and 2-ethylhexanol remains the mainstream in plasticizers. Plasticizers are mainly added into PVC. Due to environmental restrictions, newly added PVC capacity is limited, so PVC output increases are also limited.

6. Acrylic acid and esters: Early incremental capacity is released, and oversupply worsens again. During the “14th Five-Year Plan” period, China’s newly added capacity for acrylic acid and esters exceeded 1.6 million tons/year each. Average annual consumption growth rates were 7.2% and 6.2%, respectively, and excess capacity is gradually being digested.

During the “15th Five-Year Plan” period, capacity for acrylic acid and esters increases slightly. Downstream consumption of acrylic acid is concentrated in acrylic esters and superabsorbent resin (SAP). Acrylic acid and ester consumption is highly related to the real estate sector. Other application areas include express delivery, the auto industry, electronics, and more. With domestic consumption upgrading and an aging society, SAP market demand will gradually expand. Although domestic SAP capacity is oversupplied, driven by strong demand, companies are planning to invest in and build SAP units in the future. During the “15th Five-Year Plan” period, acrylic acid and ester consumption is expected to grow at average annual rates of 3.5% and 3%, respectively.

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