Is the Asian petrochemical industry mired in deep trouble, with structural restructuring expected to take at least another five years—and no better off than Europe?

Asian olefin industry profit margins have been persistently negative for an extended period. Producers are struggling to survive amid the twin pressures of oversupply and weak demand; the painful process of structural restructuring may continue until 2030. The Asian petrochemical industry is undergoing unprecedented, multifaceted challenges. At the 2025 Asia Pacific Petroleum Conference (APPEC), industry experts unanimously concluded that a perfect storm—comprising supply overcapacity, sluggish demand, and volatile feedstock prices—has swept across the entire Asian petrochemical market. Paul Joo, Director of Olefins and Derivatives at S&P Global Commodity Insights, noted that while signs of recovery are emerging for the global chemical industry after years of hardship, it may not be until after 2030 before Asian olefin profit margins turn positive. Just how dire is the situation in Asia’s olefin sector—so dire that professionals would make such a sobering assessment? I. Industry Crisis: Supply-Demand Imbalance and Eroding Profits The core challenge confronting the current Asian petrochemical industry is severe overcapacity coupled with prolonged demand weakness. Even as Asian olefin profit margins have remained negative for several years, Northeast Asia added over 10 million tonnes/year of new ethylene capacity between 2024 and 2025. According to S&P Global data, on September 10, Northeast Asian ethylene prices stabilized at USD 840/tonne, while naphtha prices in Japan stood at USD 603.25/tonne—leaving an ethylene-naphtha spread of only USD 236.75/tonne. The breakeven spread for integrated facilities is USD 250/tonne; for non-integrated units, it ranges from USD 300 to USD 350/tonne—meaning all operations are running at a loss. Sustained new capacity additions and razor-thin profit margins have directly forced multiple steam cracker units across Asia to shut down. Andrew Neale, Vice President of Chemicals and Materials at S&P Global Commodity Insights, stated that approximately 4 million tonnes/year of cracking capacity is slated for shutdown, with another 1 million tonnes/year potentially facing closure. Yet even these measures are unlikely to significantly alter the global olefin supply landscape—unless 20 or more large-scale cracking units are taken offline. A similar predicament afflicts the polyester value chain’s PTA market. Ganesh, General Manager of Petrochemical Trading at TotalEnergies Asia Trading Company, noted that global trade volumes have declined by roughly 35% over the past five years—with aromatic products suffering the steepest drop. Since early September 2025, prices across the polyester value chain have continued under downward pressure: PTA futures’ front-month contracts have generally performed weakly, reflecting overall soft market demand. II. Capacity Adjustment: East Asia Leading the Restructuring Wave Companies caught in this turbulent environment are undertaking business restructurings—either voluntarily or under duress. Current reports indicate that Japan plans to shutter at least three naphtha-based steam cracking units by 2028: Marubeni’s Chiba Ethylene Plant, Idemitsu Kosan’s Chiba Works, and JX Energy’s Kawasaki Works. Once implemented in 2028, Japan’s ethylene capacity will shrink by 20%. In South Korea, the government has convened meetings with ten leading enterprises and advised reducing total ethylene capacity by 2.7–3.7 million tonnes/year. Capacity adjustments are also underway in the PTA sector. As of mid-October this year, numerous Asian PTA units remain idle—including Sanfangxiang’s 1.2-million-tonne facility, Formosa Plastics’ 1.2-million-tonne unit, and Yisheng Dalian’s 2.25-million-tonne plant—whose restart timelines remain uncertain.

Energy crisis intensifies! Multiple countries are forced to adopt a 'four-day workweek'; flights are grounded and the chemical industry has ground to a halt.

According to a JPMorgan report, the Philippines and Sri Lanka have introduced a four-day workweek to reduce diesel consumption and delay depletion of fuel inventories. Bangladesh brought forward its Eid al-Fitr holiday and permitted universities to end the academic term early to conserve fuel. Pakistan closed schools and shifted university courses online. Thailand and Vietnam have instructed officials to walk up stairs instead of using elevators, work from home whenever possible, and minimize travel; Myanmar has implemented an odd-even license plate restriction policy to curb road fuel demand. Meanwhile, authorities in multiple countries have directly intervened in fuel markets, imposing price controls to stabilize supply order. The aviation sector bears the brunt—peak-season travel faces sharp fare hikes. Jet fuel prices are nearing USD 200 per barrel, forcing airlines to shift from cost control to outright capacity reduction—many routes have become economically unviable. Per the JPMorgan report, as of March 18, several Asian carriers—including Qantas, Air India, Cathay Pacific, and IndiGo—have rolled out phased fuel surcharges. Air India, for instance, levies surcharges of USD 125–200 per passenger on long-haul flights from Asia to Europe or North America, and USD 4.30 on domestic flights—effectively excluding many leisure travelers from the upcoming summer travel season. According to Reuters, Scandinavian Airlines (SAS) announced the cancellation of approximately 1,000 flights in April; Air New Zealand, citing soaring fuel costs, also scrapped over 1,000 flights—making it one of the earliest airlines to implement large-scale capacity cuts due to oil-price shocks. Disruption cascades through the petrochemical supply chain: major players declare force majeure. The energy crisis has now spread from the demand side to the supply side—Asian petrochemical producers face operational standstills due to feedstock shortages, prompting several regional industry leaders to declare force majeure. Per the JPMorgan report, over 50% of Asia’s naphtha supply originates from the Middle East; tightening feedstock availability in the Persian Gulf has directly triggered shutdowns or output reductions at cracking units. In Japan, Mitsubishi Chemical and Mitsui Chemical have cut ethylene production, while Sumitomo Chemical’s planned restart of its Keiyo Ethylene plant may be delayed—and even if restarted, its operating rate will likely remain constrained. In South Korea, YNCC—one of the region’s largest ethylene producers—has declared force majeure, sharply lowering its cracking unit load; Lotte Chemical and LG Chem have issued warnings to customers indicating they may follow suit. The Korean government has temporarily classified naphtha as an “economic security material” to manage rapidly depleting inventories. In Indonesia, Chandra Asri declared force majeure following sudden disruptions in feedstock deliveries, resulting in reduced operating rates at its facilities.

Soft Demand, Tight Supply to Persist in Asia Petrochemical Markets Post-India Festive Season

Oct 22, 2026

Asia petrochemical markets face softening demand post-India's festive season amid tight supply from elevated feedstock costs. Key products like polyolefins and PVC show divergent trends driven by regional production rates and downstream consumption.

icis

Soft Demand, Tight Supply to Persist in Asia Petrochemical Markets Post-India Festive Season

FAQ