[Refining Industry] Overcapacity is a global phenomenon, yet the situations in China, the U.S., Europe, and India each differ.

After 2024, this 'rebound-driven' momentum began to weaken. Accelerated substitution of natural gas and electricity in logistics, transportation, and personal mobility has led to declining demand for gasoline and diesel—directly reducing refined oil consumption. As of the first half of 2025, China’s refined oil consumption is accelerating its downward trend. Refining capacity is slightly oversupplied, with low operating rates. The commissioning of additional new capacity has further exacerbated supply-demand imbalances, causing refinery utilization rates to fall to 84% in 2024. Since 2019, increases in China’s refining capacity have been driven primarily by private-sector integrated refineries—such as Hengli Petrochemical, Zhejiang Petrochemical, Shenghong Petrochemical, and Yulong Island. State-owned enterprises have also brought online new projects—including Zhongke Refining & Chemical and Guangdong Petrochemical—while expansion and retrofitting of existing facilities (e.g., Zhenhai Refining & Chemical) have been completed on schedule. By the end of 2024, cumulative newly added capacity reached 96 million tons/year—accounting for 10% of China’s total national refining capacity. 2. Overcapacity and Policy Responses To alleviate the supply-side overcapacity caused by rapid capacity expansion, China has recently introduced a series of measures. In June 2024, the National Development and Reform Commission (NDRC) issued the ‘Energy Conservation and Carbon Reduction Plan for the Refining Industry’, stipulating that crude oil processing capacity must be capped at no more than 1 billion tons/year by the end of 2025. It requires over 30% of capacity to meet or exceed energy-efficiency benchmark levels; units falling below baseline energy-efficiency standards must undergo technological upgrades or be phased out entirely; atmospheric/vacuum distillation units with capacities of 2 million tons/year or less will be fully eliminated. In June 2025, four ministries—including the Ministry of Emergency Management and the Ministry of Industry and Information Technology—jointly issued the ‘Work Plan for Phasing Out and Upgrading Aging Chemical Production Facilities’, further accelerating the retirement of outdated refining units and optimizing refining structure. III. Medium- to Short-Term Global Crude Oil Supply Surplus The three major global energy agencies—EIA, IEA, and OPEC—consistently forecast that global crude oil supply growth will outpace demand growth in 2025–2026. The EIA projects global crude oil supply will increase by 1.81 million barrels per day (bpd) in 2025, while demand growth will be only 0.8 million bpd. In 2026, supply growth will decline slightly, and demand growth is expected to modestly improve over the 0.8-million-bpd level seen in 2025—largely influenced by India’s demand growth. OPEC forecasts global crude oil demand growth of 1.29 million bpd in 2025: 0.14 million bpd from OECD countries and 1.16 million bpd from non-OECD countries. China, the U.S., and India remain the primary expected growth drivers. OPEC expects global crude oil supply growth to exceed 3 million bpd in 2025—far surpassing projected demand growth. The IEA’s outlook is more conservative: it forecasts global crude oil demand growth of 0.726 million bpd in 2025, with negative growth anticipated for the 38 OECD countries and European nations alike. Demand growth in China and India is also projected to moderate slightly. Global crude oil supply growth is estimated at approximately 1.2 million bpd—still indicating a supply-side surplus. IV. Future Demand Structure Is Undergoing Transformation 1. Primary Demand Regions Are Shifting Due to stringent environmental policies and accelerated adoption of clean energy, crude oil demand in Europe and North America is declining markedly.

With intensifying ‘involution’ and widening losses, how can the petrochemical industry break out of its predicament?

The correlation between petrochemical product prices and crude oil prices has broken down; pricing has shifted from being cost-driven to being determined primarily by supply-demand dynamics. Key directions for petrochemical transformation include: reducing fuel output while increasing chemical production (‘reduce oil, increase chemicals’), minimizing refined fuel output; diversifying feedstocks—including introducing light hydrocarbon feedstocks; upgrading products toward high-end, high-value-added segments; and promoting industrial agglomeration through construction of large-scale, integrated refining-and-chemical complexes. The 15th Five-Year Plan period (2026–2030) is a critical stage for China’s transition from a petrochemical powerhouse to a world-class petrochemical leader. Key tasks for the petroleum and chemical industry include: steadily optimizing supply, rationally controlling new capacity for basic products, and vigorously developing advanced chemical materials and specialty chemicals; significantly enhancing innovation capacity and accelerating deployment of new quality productive forces across the sector; continuously improving green performance—raising resource and energy efficiency while reducing pollutant and carbon emission intensities; deepening digital and intelligent transformation—including building smart factories; optimizing industrial layout—advancing park-based development and balanced regional development across eastern, central, and western China; and striving to build world-class enterprises. Facing the peak in refined fuel demand, the main transformation pathways for the petrochemical industry are: ‘reduce oil, increase chemicals’ and minimize refined fuel output; diversify feedstocks—including introducing light hydrocarbon feedstocks; upgrade products toward higher value-added tiers; and promote industrial agglomeration via large-scale, integrated refining-and-chemical bases. To enhance competitiveness across the ethylene value chain, integrated development of the entire chain is essential: adopting new feedstocks and process routes to lower raw material costs; producing high-value-added downstream products to achieve differentiated competition; and scaling up plant capacity to reduce fixed costs. In 2023, China accounted for 57%, 80%, and 72% of global production of PX (para-xylene), PTA (purified terephthalic acid), and PET (polyethylene terephthalate), respectively—making it the principal participant and leader in the global aromatic hydrocarbons value chain. Globally, per capita textile consumption varies enormously—indicating substantial untapped potential. Looking at end-use sectors for PX—particularly textile and apparel manufacturing—the global spinning and garment production industry has undergone successive relocations: from Europe and North America to Asia and Latin America; and within Asia itself—from Japan and South Korea to China, then gradually diffusing to Southeast Asia, South Asia, and Central Asia. From a supply-side perspective, China’s PX industry scale leads globally by a wide margin—and is expected to maintain steady growth. On the demand side, China’s overall economic size continues expanding, domestic final consumption still has considerable room for growth, and rising urbanization rates will sustain growth in per capita consumption of textiles, apparel, packaging materials, and other end-use products. Taken together, China’s PX consumption still holds significant growth potential. Catalytic Cracking in an Era of Comprehensive Product Overcapacity Catalytic cracking—one of the most important secondary processing technologies in refining—will increasingly process heavier feedstocks in the future, yielding mainly gasoline and light olefins (not diesel), with increased slurry output and unchanged coke selectivity. Its product slate will be flexible—allowing adjustable yields between gasoline and light olefins. A dedicated light hydrocarbon conversion unit should be added to process C4–C6 hydrocarbons. China’s upper limit for refining capacity stands at 1 billion tons/year. Refined fuel demand has already peaked; crude oil processing volume is projected to peak at 800 million tons/year in 2028, begin declining after 2040, drop sharply after 2050, and fall to around 300 million tons/year after 2060—primarily for producing chemicals and materials. Faced with immense pressure to restructure refining outputs, how can the next decade’s reduction in gasoline and diesel volumes be matched with growing demand for ethylene feedstocks?

Ecovyst earnings up next: Can refining demand sustain momentum?

May 4, 2026

Ecovyst Inc. expects first-quarter results of 6.3 cents per share on $190.9 million revenue, driven by refinery utilization and mining demand. Investors will assess if sulfuric acid sales can sustain earnings growth following the company's recent portfolio transformation.