Geopolitical Shifts Drive Global Polypropylene (PP) Toward Regional Restructuring

Introduction: The global polypropylene trade landscape is undergoing profound changes. In recent years, frequent geopolitical conflicts have accelerated the disintegration of the traditional "production center-consumption market" global supply chain system. With China's continued capacity expansion, the Russia-Ukraine conflict, and the Israel-Iran conflict, these three major factors are driving the global polypropylene industry to rapidly form a regionalized supply network characterized by "local production and local sales."

1. Overview of the Global Trade Landscape of Polypropylene

Compared with 2024, the global polypropylene trade flow will change again in 2025, with a clear regional differentiation in the global polypropylene supply and demand pattern. The current net inflow regions are mainly concentrated in Southeast Asia, South Asia, South America, and Africa, while the Middle East and North America are the main net outflow regions, exporting to global markets by leveraging their production capacity advantages.

Net Inflow Area

1 Southeast Asia (Vietnam, Indonesia, Thailand, Malaysia, etc.)

Rapid Demand Growth: Due to the rapid development of manufacturing in the Southeast Asia region, especially in the packaging, construction, and consumer goods industries, the demand for polypropylene continues to grow. Although some countries (such as Indonesia) are increasing their production capacity, they still cannot meet the rapidly growing consumption demand and rely on imports from the Middle East, China, Japan, and South Korea.

2 South Asia (India, Pakistan, etc.)

India is the fastest growing in the world.Polypropylene MarketOne of them is that the demand for plastic products remains strong, and a large amount of raw materials still needs to be imported. China's polypropylene exports to India are mainly used in the packaging and consumer goods industries.

3 South America (Brazil, Peru, etc.)

Although Brazil has certain petrochemical production capacity, polypropylene still relies on imports, especially from the Middle East and China. Additionally, demand from the construction and packaging sectors has surged, with the main applications being packaging materials and construction pipes.

4 Africa (Egypt, South Africa, etc.)

The growth in demand for infrastructure and consumer goods in the African market is primarily applied to the construction, packaging, and consumer goods industries. However, due to limited local production capacity, there is a reliance on imports. Polypropylene is mainly imported from the Middle East (such as Saudi Arabia) and China.

  Net outflow area

1 Middle East (Saudi Arabia, UAE, etc.)

The Middle East relies on low costsNatural gasRaw materials and polypropylene production costs are low, making it one of the world's major export regions. The main export destinations are Asia and Europe.

2 North America (United States)

The United States has a high polypropylene production capacity, but due to stable domestic demand, its export volume is relatively limited, mainly flowing to South America, Latin America, and Europe.

3 Asia (South Korea, Japan)

South Korea and Japan, as major polypropylene producers and exporters in the world, may not match China and the Middle East in terms of production capacity, but they have significant advantages in high-end grades, technological innovation, and quality stability. They primarily target high value-added markets.

II. Analysis of Global Trade Flow Drivers

1 Significant expansion of China's production capacity, transitioning from net importer to net exporter.

2021-2025 During this period, due to numerous earlier plans in China, polypropylene facilities have entered a rapid expansion phase, with China's production capacity increasing by over 17 million tons, accounting for approximately 76% of the global total capacity increase. China's share of global polypropylene capacity is expected to rise from 37% in 2021 to 44% in 2025, an increase of seven percentage points. This continuous and rapid expansion is accelerating the reshaping of the global supply pattern.

1 With the rapid increase in production capacity: China has significantly expanded its polypropylene (PP) production capacity through "refining and chemical integration" projects, gradually transitioning from a net importer to a net exporter. By 2024, China's PP export volume has surpassed that of South Korea, rising to the second position.

2 Impact on traditional exporting countries: Traditional exporters to China such as Middle Eastern countries (Saudi Arabia, the UAE) and South Korea have experienced a decline in export volumes to China and are forced to seek new markets (such as Southeast Asia and Africa).

3 Intensified price competition: China's low-cost PP squeezes the profits of producers in other regions, especially in the European and Asian markets.

2 Russia-Ukraine Conflict: Energy Costs and Regional Supply Chain Restructuring

1 Energy Price Fluctuations: Reduced Russian natural gas supply has driven up energy costs in Europe. European PP producers, such as BASF in Germany, have cut production due to high electricity/gas prices, leading to increased import demand.

2 Trade sanctions and logistical shifts: Russia's PP exports are restricted (previously mainly directed to Europe), and are now relying on markets such as China, Turkey, and India; meanwhile, Europe is turning to the Middle East and the United States for procurement.

3 Regionalized trade intensifies: Europe seeks to "nearshore" its supply chains to reduce dependence on Russia, while exports to Europe from the Middle East (Saudi Sabic) and the United States (low-cost shale gas feedstock) increase.

3 Israel-Hamas Conflict: Risks to Middle Eastern Supply and Shipping

1 Risk in the Strait of Hormuz: Iran threatens to blockade the strait (a channel for 30% of global oil trade), leading to increased transportation costs for PP feedstock (propane) and finished products, as well as higher insurance expenses.

2 Uncertainty in Middle Eastern production capacity: The export stability of countries such as Iran, Saudi Arabia, and Qatar is under market scrutiny, leading some buyers to turn to more stable sources.

3 Regional demand differentiation: Internal demand in the Middle East (such as Egypt and Turkey) is affected by conflicts, impacting economic growth and causing fluctuations in PP imports.

Other factors:

Post-pandemic demand recovery is uneven: Demand in Southeast Asia and India is growing strongly, attracting more PP cargoes; weak demand in Europe and the US is leading to inventory pressure. US shale gas advantage: Ethane cracking enables low-cost PP production, increasing US exports, mainly to Latin America and Europe. Environmental policies and recycling economy: The EU’s carbon border adjustment mechanism (CBAM) raises the cost of fossil-based PP, while trade in recycled PP (such as from Japan to Europe) is increasing.

3. From "Global Supply Chains" to "Regional Supply Networks"

In recent years, geopolitics has had a significant impact on global trade flows and is highly unpredictable. Therefore, in the current volatile overseas environment, the global trade of polypropylene may shift from a "globalized supply chain" to a "regionalized supply network," gradually forming three major regional supply networks centered around China, the Middle East, and North America.

In the future, regionalization will become mainstream: Geopolitical factors and cost differences are forcing companies to "produce locally, sell locally." This leads to a supply chain rebalancing under the dual logic of "cost advantage + geopolitical security." In the future, China, the United States, and the Middle East will form three major regional supply centers, dominating the Asian, American, and Middle Eastern/African markets, respectively, while Europe may reshape its competitiveness through green technology. Residual areas of globalization: High-end specialty materials (such as medical-grade PP, modified PP, etc.) will still rely on global trade, but their proportion will decrease. China's PP industry needs to focus on "cost control + high-end breakthroughs + regional layout" to maintain its advantage in global competition.