APPEC: Asian olefins oversupply may last 3-4 years amid slower capacity growth

Oversupply in the Asian olefins market could take another three to four years to be resolved as new capacity investment slows, according to Paul Joo, director, olefins and derivatives, S&P Global Energy.

Joo was speaking at APPEC 2025 in Singapore, hosted by Energy. The event kicked off Sept. 8 and will end Sept. 11.

Asian olefins margins have been negative for the last few years, as China added more than 10 million mt/y ethylene capacity over 2024-25, leading to some steam cracker shutdowns in Northeast Asia.

"Some light on the horizon has started to appear after [several challenging] years in the chemical industry," Joo said. "But at the same time, it will likely be after 2030 before Asian olefins margins turn positive," Joo said.

At least three naphtha-fed steam crackers in Japan -- Maruzen's Chiba unit, Idemitsu Kosan's Chiba unit and ENEOS' Kawasaki unit -- are scheduled to be decommissioned by 2028, a move that is expected to reduce the country's ethylene capacity by roughly 20%, Platts reported earlier.

South Korea is also considering steam cracker restructuring, with the government requesting cracker operators to submit information about their plants. The government has advised producers to reduce ethylene production capacity by 2.7 million-3.7 million mt/y.

Platts, part of Energy, assessed the CFR Northeast Asia ethylene price as stable day over day at $840/mt on Sept. 10, while the CFR Japan naphtha price rose $6/mt from the previous session to $603.25/mt.

The price spread between ethylene and naphtha was calculated at $236.75/mt, below the breakeven level of $250/mt for integrated producers and $300-$350/mt for non-integrated producers.

Capacity reduction, ethane focus

China is expected to slow down petrochemical plant investment beyond 2029, according to Joo.

"Investment is slowing, except for projects already under construction or near completion," Joo said, adding that some small-sized, outdated naphtha-fed steam crackers are already in the process of shutting down in China.

Joo forecast that about 6.5 million mt/y of ethylene capacity is anticipated to shut worldwide over 2020-28.

Additionally, Asian steam crackers have been considering increasing ethane cracking from naphtha due to ethane's cost competitiveness. In Asia and Europe, four ethane-fed steam crackers with a combined ethylene capacity of 4.15 million mt/y are due to start from 2025 to 2027, according to Joo.

Joo noted that US ethane availability is likely to slow down from the mid-2030s due to reaching peak capacity, while global demand for ethane is expected to increase.