Platts Chemical Trends H1 2026
Platts Chemical Trends H1 2026
Ethylene
Overcapacity in olefins drives global cracker reviews, shutdowns
- Europe faces more rationalization, consolidation
- Capacity additions drive Asia to review assets
- High US gas prices pressure cracker margins
As global olefins markets enter 2026, expectations of continued weakness in the first half of the new year have led operators to review or rationalize crackers amid overcapacity due to new assets in Asia, on the US Gulf Coast and in the Middle East
That's especially the case in Europe, which has faced the most significant pressure due to the region's older assets and lower feedstock and energy competitiveness.
Further rationalization, minimal change anticipated
The European olefins market is projected to remain subdued throughout the first half of 2026, as derivative demand is anticipated to show little to no significant improvement.
Many cracker operators have cited bleak outlooks, saying that unless there is some improvement to the Russia-Ukraine war, tariff disputes as well as inflation and interest rates, demand is unlikely to increase.
Supply is also expected to remain long in Europe, despite the wave of rationalization and consolidation in 2025.
"Cracker utilization in Western Europe languished around the 75% mark in 2025, 10%-15% lower than desirable levels," Andy Orszynski, European ethylene analyst for S&P Global Energy CERA, said. "We expect operating rates to improve to around 80% during H1 2026, though this is largely due to the permanent closure of Mossmoran in February and significant turnaround activity. Over the long term, the European ethylene market remains oversupplied by 1 million-1.5 million."
ExxonMobil said it planned to shut its Fife ethylene plant in Mossmoran, Scotland, in February 2026.
Imports of olefins and derivative products are also expected to remain a factor in Europe as they will continue to weigh on market fundamentals and pricing.
From early January 2025 through mid-December, European FD NWE ethylene spot prices fell by Eur290/mt, according to Platts data.
Seller optimism around reduced length has been cautious amid expectations of minimal change to the demand picture from 2025. As such, further rationalization of cracker or derivative assets is anticipated to continue in the coming year and in the longer term.
"Mossmoran's scheduled closure in Q1 2026 means a total of 3.3 million tons of ethylene capacity will have left the European market in just two years, with a further 1.1 million tons announced by Dow and TotalEnergies in 2027," Orszynski said. "But with Ineos Antwerp also coming online in 2027, capacity utilization will struggle to recover beyond the mid-80% range before the end of the decade."
Asia cracker landscape under review amid capacity additions
Looking to the first half of 2026, the rationalization of naphtha-fed steam crackers in Asia is set to continue, particularly in Japan, where plans are in place to shut three additional crackers by 2028. This will lead to a significant reduction in the country’s ethylene capacity, estimated at around 20%, starting with Maruzen Petrochemical's Chiba cracker between 2026-27.
In South Korea, the Ministry of Trade, Industry and Energy has initiated a restructuring plan targeting a decrease in naphtha-fed steam cracker capacity by 2.7 million-3.7 million mt/year, or 20%-28% of the country's capacity. This strategic shift aims to focus production on high-value specialty products amid ongoing challenges in olefins margins. Currently, South Korea's ethylene capacity stands at 13 million mt/year, with naphtha crackers located in Ulsan, Daesan, and Yeosu.
The rationalization measures are expected to primarily affect older, less efficient units, which may enhance the profitability of NCC operators. However, uncertainty around the timing of these efforts complicates predictions regarding their impact on the market. With many South Korean steam crackers operating at about 75% capacity due to weak demand, the upcoming launch of new capacities in Asia and the Middle East—expected to add 6 million mt/year of ethylene in 2026—could overshadow South Korea's rationalization efforts.
Production margins tighten in US
A bearish outlook driven by ongoing oversupply also characterizes the US ethylene market. Market participants said that under current long conditions and with stagnant downstream demand, fluctuations in upstream prices will primarily influence price direction.
The recent strength in natural gas prices has mirrored rising ethane values, exerting pressure on cracker margins, pushing them close to breakeven levels. Despite weak fundamentals, the increase in ethane prices has established a floor for ethylene spot prices, preventing further declines.
The US ethane cracker margin reached a two-year low of 8.81 cents/lb on Nov. 19, 2025, according to Platts data. Concerns among market participants regarding tightening production margins have emerged, leading to discussions about potential reductions in cracker run rates. However, no formal announcements have been made.
The rise in feedstock prices follows increased global demand for ethane, with new crackers coming online in Asia and the Braskem Idesa plant in Mexico opening its ethane import terminal in May 2025.
Contributors: Sagar Baul, Carla Bridi, Benjamin Brooks, Rosa Castaneda, Heng hou Cheong, Alejandro Chávez, Fumiko Dobashi, Ashish Dhyani, Davi Dos santos, Leo Engels, Yasmeen Feghali, Alex Fiedosiuk, Isaac Foong, Haitian Fang, Charlene Goh, Jing Kang Goh, Talissa Gomes, Zhi Xuan Ho, Joe Higginson, Gustav Inge Holmvik, Hui Heng, Deja Harrison, Zhi yi Tan, Kamna Kapoor, Tareen Kazi, Sunaina Kura, Keith Mackrell, Andre Mikhail, Mainak Moitra, Daniela Morales pumarino, Esther Ng, Finlay Oriordan, Ashley Peh, Iris Poon, Pankaj Rao, Yazu Romero, María Rosales larios, Baran Serdaroglu, Zong Ming Shin, Archit Singh, Dyvia Shah, Maria-Eleni Tsimeki, Fernando Tiscareno, Karina Trevizan, Chichi Ubani, Luke Warren, Mujidah Yahaya, Nate Zhang
Editors: Marieke Alsguth, Jim Levesque, Benjamin Morse, Derek Sands
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