When will the ethylene industry achieve supply-demand balance? latest predictions from authoritative institutions are here.

The global ethylene industry is facing supply-demand imbalance and cost pressure, which is also driving significant changes in the industry landscape.

In the past two years, the global average operating rate for ethylene has been below 80%, and the average return on investment has fallen to negative numbers.

The international ethylene prices are already at historical lows, and the ethylene industry is repeatedly being tempered at the bottom of its cycle.

The prolonged bottom consolidation has also triggered a global wave of ethylene shutdowns.

By 2027, Europe's ethylene industry is expected to lose 4.6 million tons per year of capacity.

South Korea has also initiated industrial restructuring, with ten leading companies agreeing to cut 25% of their ethylene production capacity.

China's ethylene industry has outdated equipment that is over 30 years old and cannot meet energy efficiency standards, resulting in a risk of being phased out due to high energy consumption.

I. Overall Industry Performance: Low Operating Rates and Negative Returns Amid Supply-Demand Imbalance

Ethylene is the most important cornerstone product in the petrochemical industry, and its market performance can directly reflect the health of the global petrochemical industry.

The current global average operating rate for ethylene is only around 80%, showing a noticeable decline.

The average return on investment has turned negative.

The profit margins across the entire petrochemical value chain remain persistently low, and profitability continues to decline.

It seems that the possibility of recovery before 2027 is slim, and the entire industry is facing long-term challenges.

According to S&P Global data, in September 2025, the price of ethylene in Northeast Asia is approximately $840 per ton, and the price difference between ethylene and naphtha is $236.75 per ton.

With integrated upstream and downstream refining units, the breakeven point is approximately $250 per ton.

The breakeven point is approximately 300 to 350 USD/ton for facilities without upstream and downstream integrated refining and chemical operations.

Ethylene plants using naphtha as a raw material, whether or not they are integrated with refining, are operating at a loss.

Part Two: Regional Pattern Reconstruction, European and American Decline and Asian Rise

The global ethylene industry landscape is being reshaped, with different destinies for each region worldwide.

Cost pressures in Europe lead to large-scale exits

The challenges facing Europe's ethylene industry are unprecedented, with an expected loss of 4.6 million tons per year in capacity by 2027.

European ethylene plants face multiple challenges, including high energy costs, the growing pressure of carbon taxes, and weak end-user demand.

Andrew Neale, Vice President of Chemicals and Materials at S&P Global, believes that Europe's "high-cost" ethylene capacity will face overcapacity and efficiency improvements integration in the next two years.

The divergence in performance within Asia is quite noticeable.

Unlike Europe, the situation in Asia is more complex.

South Korea is advancing an industry restructuring plan, with the government requiring companies to reduce capacity by 25%. It is expected that ethylene capacity will be cut by approximately 2.7 to 3.7 million tons per year.

Three naphtha cracking units in Japan are expected to shut down before 2028, resulting in a 20% reduction in Japan's ethylene production capacity.

Currently, China's "anti-involution" policies are frequently emerging, posing a risk of phasing out equipment that has been in use for over 30 years. The capacity affected is approximately 3.3 million tons per year, accounting for 8% of the country's total capacity.

There is also an annual production capacity of 2.4 million tons that needs upgrading, renovation, or faces the risk of being phased out due to failing to meet the energy efficiency benchmark (590 kg of standard coal per ton).

Even if the above 5.7 million tons/year capacity is fully phased out, China will still be the main driver of ethylene capacity growth in the coming years.

According to GlobalData, in the global ethylene capacity expansion plan from 2022 to 2030, Asia's new and expanded ethylene capacity exceeds 60 million tons, contributing 60% of the global new capacity. The main contributors to this expansion are China and India.

Although the expansion of ethylene production capacity in China is still relatively significant, there are not many cost advantages. Apart from Satellite and Wanhua, the raw materials are mainly naphtha, supplemented by some coal-to-olefins.

The cost advantage in the Middle East and North America is obvious.

In contrast to Europe and Asia, the Middle East and North America have a significant cost advantage due to abundant ethane resources and essentially face no risk of shutdown.

The ethylene production capacity in North America is beginning to slow down due to a decrease in demand.

The ethylene production capacity in the Middle East remains stable, and the pricing advantage of ethane also favorably supports the competitiveness of the export market.

3. Is it an opportunity or a challenge for China's ethylene industry?

In the context of a profound global restructuring of the ethylene industry, does China's ethylene industry face opportunities or challenges?

In our country, ethylene feedstock is primarily based on naphtha, with some coal/methanol-to-olefins as a supplement. The ethane cracking process is only utilized by Satellite and Wanhua.

Although our country does not have abundant ethane resources, we have a resource endowment for the coal-to-olefins process. The technology is relatively mature, the industrial chain is resilient, and we have a unique competitive advantage.

Some of the ethylene plants in our country that use naphtha-based technology have already reached a world-leading level.

According to the assessment by Solomon Consulting, the Zhenhai Refining & Chemical Company's No. 1 ethylene unit has been at the forefront of the global naphtha process for seven consecutive times.

Zhongke Refining and Chemical's ethylene plant has achieved world-leading levels, with its asset investment return rate, capacity utilization rate, energy consumption, maintenance efficiency index, and labor costs all entering the top tier.

The challenge faced by the ethylene industry in our country, which everyone can probably guess, is undoubtedly the risk of overcapacity.

TF Securities' research report points out that the biggest challenge facing China's ethylene industry is the surplus caused by a large amount of new capacity from oil-to-chemical conversion and the surplus brought by new capacity from differentiated routes (coal-based, gas-based). The combination of these two factors increases the risk.

During the 15th Five-Year Plan period, it is expected that the government will implement policies to control the expansion of new production capacity, tighten project approvals, and accelerate the elimination of outdated and high-energy-consuming capacities.

4. When will there be a reversal in the future and what will be the development trend?

In the face of adversity, the only right thing to do is to strive to find a way out.

S&P Global predicts that it may take 3-4 years for the imbalance in the Asian olefin market to ease, as the addition of new capacity slows down.

More aggressive analysts believe that "the chemical industry has undergone many years of challenges, and dawn is breaking, but the olefin industry in Asia will only have hope of turning a profit after 2030."

Given the current situation, the trend towards lighter raw materials is inevitable.

According to publicly available information, from 2025 to 2027, at least four ethane cracking units with a total capacity of 4.15 million tons per year will be commissioned in Asia and Europe.

Due to the integration of refining and chemical processes, ethylene units in our country cannot change the properties of raw materials. Instead, they can only continuously update technology and continuously reduce production costs through technological innovation.

The next five years will be a critical period of adjustment for the global ethylene industry.

On the one hand, we need to wait for the possible withdrawal of production capacity from Europe, Japan, South Korea, and China to take effect.

On the other hand, we need to wait for the expanded capacity in emerging markets such as China and India to be realized.

In short, supply and demand will eventually balance again, but this time it may take a little longer.

The production capacity with cost advantages and technological innovation will emerge victorious in the new round of industry reshuffling.

Domestic leading companies such as Baofeng, Satellite, and Wanhua, which have olefin production capacity from coal or ethane, are expected to accumulate competitive advantages at the bottom of the industry cycle due to their resource endowment and cost advantages.