SunSirs: Market Analysis of Propylene Production via Propane Dehydrogenation in China

I. Introduction

Propane dehydrogenation (PDH) technology is a process route that uses propane as feedstock to produce propylene through catalytic dehydrogenation reactions. This process offers significant advantages, including high propylene yield, relatively simple flow, moderate investment intensity, and environmental friendliness, making it a key global propylene production technology. Amidst the profound restructuring of the global petrochemical industry, Northeast Asia has emerged as the most dynamic region for PDH development. This prominence stems from its massive market demand, comprehensive industrial chain support, and sustained technological innovation. China, in particular, has spearheaded both capacity expansion and technological advancement within this region.

II. Current Status and Characteristics of China's PDH Projects

2.1 Production Capacity Scale and Growth Trajectory

China's PDH industry has experienced explosive growth since the commissioning of Tianjin Bohai Chemical's first 600,000-ton-per-year facility in 2013. By June 2025, domestic PDH total capacity had surged to 23.43 million tons per year, representing an 8.62% year-on-year increase, establishing China as the world's largest PDH production base. In terms of development pace, China's PDH industry exhibits distinct cyclical patterns: the first wave of commissioning peaks occurred between 2014 and 2016, followed by a second explosive growth phase from 2019 to 2022, during which new capacity additions reached 21.26 million tons/year. Between 2020 and 2022 alone, 20 PDH units commenced operations, collectively adding 11.38 million tons/year of capacity—accounting for 53.5% of the total new capacity during that period.

Despite profitability pressures in the first half of 2025, 2.56 million tons of new capacity still came online, including projects such as Quanzhou Guoheng's 660,000 tons, Yantai Wanhua's Phase II 900,000 tons, and Zhongjing Petrochemical's Phase III 1 million tons. Notably, capacity growth has slowed significantly, declining from an average annual rate of 26-39% between 2021 and 2023 to less than 10% in the first half of 2025. This marks the industry's transition from a phase of “scale expansion” to a new stage focused on “enhancing quality and efficiency.”

By the end of 2025, China's PDH capacity is projected to exceed 25 million tons, accounting for nearly 32% of total propylene production capacity. This will establish PDH as the second-largest production route after naphtha cracking. By that time, the PDH process will contribute 75% of new propylene capacity additions, continuing to dominate the industry's supply landscape.

2.2 Geographic Distribution and Industrial Clusters

China's PDH capacity exhibits highly concentrated “coastal clustering,” with East China holding absolute dominance. By June 2025, East China (Jiangsu, Zhejiang, Fujian) will reach 11.8 million tons/year, accounting for 50.7% of the national total; Shandong Province holds 29.02% with 6.79 million tons/year, while South China (Guangdong, Fujian) accounts for 10.88% with 2.54 million tons/year. Together, these three regions exceed 90% of total capacity.

This layout follows a profound resource endowment logic:

East China Region: Leveraging the Yangtze River Delta's world-class port cluster, it has formed an integrated “raw material-production-processing” model. Ningbo, Lianyungang, and Jiaxing host leading enterprises like Sinochem Ruiheng, Formosa Plastics, Kingfa Science & Technology, Sinopec Serbon, and Satellite Chemical. The region boasts a developed water transport system, well-equipped terminals, and storage/logistics facilities, offering significant cost advantages for imported propane logistics. Taking Zhejiang as an example, its 2024 capacity reached 11.57 million tons/year, ranking second nationally, with major players including Zhejiang Petrochemical and Satellite Chemical.

Shandong Region: As a traditional chemical powerhouse, Shandong leveraged technological expertise from companies like Wanhua Chemical and Yuhuang Chemical to achieve concentrated capacity expansion post-2021. Between 2021 and 2025, Shandong added 1.6 million tons of new capacity, primarily distributed in Yantai and Dongying. By 2024, Shandong's total propylene capacity reached 14.31 million tons/year, with the PDH route's share continuously increasing.

South China Region: Represented by Guangdong and Fujian, this area has developed distinctive enterprises like Juzhengyuan and Zhongjing Petrochemical, leveraging the Guangdong-Hong Kong-Macao Greater Bay Area and Meizhou Bay Petrochemical Base. By integrating large-scale LPG receiving terminals, the region effectively reduces feedstock costs while maintaining proximity to downstream consumption markets in the Pearl River Delta.

2.3 Technology Routes and Equipment Localization

China's PDH facilities primarily adopt two international mainstream technologies: Honeywell UOP's Oleflex technology and CB&I Lummus' Catofin technology, which together account for over 90% of global operational PDH units. Oleflex employs a continuous moving bed process, while Catofin utilizes a fixed-bed cyclic regeneration process, each with distinct advantages and disadvantages.

In the catalyst field, Clariant's Catofin catalyst demonstrated exceptional performance in the Ulsan PDH project in South Korea.

Market Analysis of Propylene Production via Propane Dehydrogenation in China

I. Introduction

II. Current Status and Characteristics of China's PDH Projects

2.1 Production Capacity Scale and Growth Trajectory

2.2 Geographic Distribution and Industrial Clusters

This layout follows a profound resource endowment logic:

2.3 Technology Routes and Equipment Localization

In the catalyst field, Clariant's Catofin catalyst demonstrated exceptional performance in the Ulsan PDH project in South Korea.

2.4 Raw Material Supply Chain Analysis

China's PDH industry faces severe raw material supply challenges. Domestic propane production falls far short of demand, with approximately 80% reliant on imports—a proportion even higher in coastal regions. In January 2025, China's propane output reached only 200,400 metric tons, while PDH facilities required 9.3498 million metric tons (January–June), revealing a substantial supply-demand gap.

Import sources are highly concentrated, primarily originating from the Middle East (Saudi Arabia, UAE) and North America (United States). China's propane imports peaked at 1.67 million tons in March 2025 but plummeted to under 1.5 million tons in April due to escalating tariffs between China and the US. This forced some enterprises to suspend operations, highlighting supply chain vulnerabilities. Although domestic refinery propane production has grown annually (up 38.41% year-on-year in January 2025), the absolute volume remains negligible.

2.5 Downstream Product Structure and Market Demand

China's PDH projects primarily produce polypropylene (PP), accounting for over 60% of downstream products, with the remainder comprising propylene oxide, acrylic acid, acrylonitrile, and others. This homogeneous structure fuels intense market competition and compresses profit margins. Since 2024, as capacity continues to expand, profit margins for PDH-based PP plants have plummeted to historic lows, forcing some facilities to reduce operating rates.

To break this impasse, leading enterprises are transitioning toward high-end and differentiated products.

Notably, the value of hydrogen produced as a byproduct of PDH is increasingly recognized. Each ton of propylene produced yields approximately 0.04 tons of hydrogen. Based on planned projects under construction, China's PDH hydrogen production potential reaches 868,000 tons per year, positioning it as a potential premium hydrogen source for fuel cells and other hydrogen applications.

Independent PDH enterprises, lacking downstream integration and facing high raw material dependency, endure significant operational pressures. Industry utilization rates hovered around 72.2% in the first half of 2025, with some small and medium-sized enterprises enduring prolonged shutdowns.

Industry consolidation is accelerating, with enterprises lacking scale advantages and supply chain synergies facing elimination. Investment momentum showed signs of retreat in the latter half of 2025.

2025 marks a turning point for China's PDH industry. Under dual pressures from the “dual carbon” goals and overcapacity, the sector has entered a new phase of “quality enhancement and capacity reduction.” Post-2025, annual growth in new capacity is projected to fall below 5%, with enterprises shifting focus to technological upgrades—such as improving propylene yield, reducing energy consumption, and extending catalyst lifespan.

Structural overcapacity issues have become prominent. In 2024, China's propylene production capacity reached 69.73 million tons, while apparent consumption stood at 55.17 million tons, resulting in a capacity utilization rate of only 76.6%. The industry's reliance on imported materials for PDH-specific feedstock remains around 10%, highlighting structural contradictions. Future development will focus on phasing out outdated capacity, with approximately 30% of small and medium-sized plants likely exiting the market.

High import dependency for feedstock remains China's PDH industry's greatest vulnerability. From January to June 2025, PDH propane demand reached 9.3498 million tons, a 20.71% year-on-year increase. However, imports are heavily concentrated in the Middle East and North America, posing significant geopolitical risks. During Sino-US trade tensions, tariff adjustments caused April demand to plummet over 20%, forcing some enterprises to suspend operations.

Technological advancement in PDH remains crucial for cost reduction and efficiency gains. Current objectives include lowering catalyst costs, enhancing single-pass conversion rates, and reducing energy consumption and carbon emissions. Collaborative innovation among industry, academia, and research institutions is emerging as a trend, exemplified by the partnership between the Shenzhen Advanced Polymer Materials Research Institute and Juzhengyuan to advance domestic production of high-end polyolefins.

The value development potential of by-product hydrogen is enormous. PDH by-product hydrogen boasts high purity (>99.9%) and can be directly used in fuel cells. Based on 2025 production capacity, China's PDH by-product hydrogen could reach 800,000-900,000 tons per year, equivalent to meeting the demand of 400,000-500,000 hydrogen fuel cell vehicles.

In 2025, the operating rates of domestic PDH facilities fluctuated significantly due to environmental inspections, with some enterprises forced to reduce production due to carbon emission quotas. China's PDH industry has covered in a decade the ground that developed countries traversed over several decades, making 2025 a critical juncture for industrial transformation.

As an integrated internet platform providing benchmark prices, on December 4, the benchmark price of propylene from SunSirs was 6190.75 RMB/ton, an increase of 0.16% compared with the beginning of the month (6180.75 RMB/ton).

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