China's Ethylene Production Capacity Surge May Put More Pressure on US and European Chemical Companies

China is rapidly increasing its production of ethylene, an important component of plastics, packaging, and construction, which is expected to drive down global prices and impact U.S. and European chemical manufacturers already struggling with oversupply and weak demand.

As the overall economy slows down, domestic demand in China is also weakening, and real estate investment is declining. This could lead to an influx of Chinese ethylene into the global market, delaying price recovery, analysts say.

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The world's second-largest economy currently has an ethylene capacity of over 54 million tons per year and is expected to rise to about 9% of the global capacity in 2024 by 2030, exceeding 75 million tons per year (Mtpa), according to data from Vertical Research Partners.

"China has been under pressure to increase its capacity before 2030," Dow Chemical CEO Jim Fitterling said at a Morgan Stanley conference this month.

American producers, including Dow, Celanese, and LyondellBasell, have seen their profits eroded due to falling prices.

High production costs and aging factories are squeezing European manufacturers, making them increasingly reliant on imports of basic chemicals such as ethylene and propylene.

Garrie Li from S&P Global Commodity Insights stated that China did not cancel some major projects during the downturn, extending the market slump.

Production capacity growth is expected to surpass demand growth.

Peter Vanacker, CEO of LyondellBasell, stated that the rapid development of China's petrochemical industry has raised concerns about overcapacity in the global market.

China's real estate industry—an important consumer sector for petrochemical products—remains weak, with investment declining by 12% in the first seven months of 2025.

"If China's demand is lower than the new capacity, then China may export," said Morningstar analyst Seth Goldstein, adding that this would put pressure on production in Europe and capacity in North America.

According to S&P, China's polypropylene exports are expected to rise from 1.3 million tons in 2023 to 2.4 million tons in 2024, and may reach 3.2 to 3.4 million tons by 2026.

The European Chemical Industry Council (Cefic) stated that China's low-cost model has made it the largest chemical supplier to the 27 EU countries, with shipments exceeding 17 billion euros (19.97 billion dollars) in the first half of 2025.