CICC released a research report stating that China's ethylene industry is currently still in an expansion cycle, while overseas capacity is facing accelerated withdrawal pressure. Based on global capacity deployment plans, ethylene is expected to reach a turning point after 2027. In July 2025, five departments including the Ministry of Industry and Information Technology jointly launched a comprehensive assessment of outdated petrochemical and chemical facilities, and it is expected that outdated capacity in refining and ethylene may face further clearance. The core improvement of the ethylene industry in the future still requires controlling new capacity additions and reducing investment scale. If domestic and international policies can strictly control new ethylene capacity additions, manage the deployment structure of various production routes, and reorganize outdated capacity, it may stimulate an accelerated arrival of the industry turning point.
CICC's main viewpoints are as follows:
China's ethylene continues expansion, with nearly 25 million tons of planned projects over the next three years
Over the past few years, China's ethylene capacity has been in a rapid expansion cycle, but by 2024, the ethylene equivalent gap still exceeds 21 million tons, with an equivalent import dependency of 31%. Currently, new capacity additions in the ethylene industry continue, with a total planned capacity of 24.82 million tons from 2025-2027. It is expected that if projects under construction are commissioned as scheduled, the domestic ethylene gap may be essentially filled by the end of 2027.
Overseas capacity accelerates withdrawal, with higher shutdown risks for European and Japanese-Korean capacity
Among global oil-based ethylene capacity, China's capacity commissioning time is relatively late with relatively advanced facility levels, while European and Japanese-Korean capacity was built earlier and is located on the right side of the global cost curve, facing higher shutdown risks. Overseas capacity planned for withdrawal in 2025-2027 may reach 5.97-8.30 million tons, accounting for 3-4% of global capacity.
Global supply pattern reshaping, ethylene expected to reach turning point after 2027
Combining domestic and international additions and withdrawals, global net capacity additions over the next three years are approximately 11.26/15.65/8.40 million tons, with growth rates of 4.9%/6.5%/3.3% respectively, showing capacity growth rate decline in 2027. Considering global annual demand growth of around 3.5% and the time needed to digest new capacity additions, the ethylene industry is expected to see marginal improvement after 2027.
Strictly control total volume and new additions from various routes, focus on subsequent domestic and international ethylene industry policies
A domestic refining capacity ceiling of one billion tons has been set, but the trend of reducing oil and increasing chemicals still puts some pressure on ethylene output. In July 2025, five departments including the Ministry of Industry and Information Technology jointly launched a comprehensive assessment of outdated petrochemical and chemical facilities, and it is expected that outdated capacity in refining and ethylene may face further clearance. The core improvement of the ethylene industry in the future still requires controlling new capacity additions and reducing investment scale. Under the "anti-involution" background, it is recommended to continuously monitor targeted subsequent policies for domestic and international ethylene industries. If new capacity additions can be strictly controlled, deployment structure of various routes managed, and outdated capacity reorganized simultaneously, it may stimulate an accelerated arrival of the industry turning point.
In terms of targets, it is recommended to focus on core ethylene production enterprises, including low-cost alternative route companies Satellite Chemical Co.,Ltd. (002648.SZ) and Ningxia Baofeng Energy Group Co.,Ltd. (600989.SH), private large refining and chemical enterprises Hengli Petrochemical Co.,Ltd. (600346.SH), Rongsheng Petrochemical Co.,Ltd. (002493.SZ), and Jiangsu Eastern Shenghong Co.,Ltd. (000301.SZ), and state-owned refining and chemical enterprise Sinopec Shanghai Petrochemical Company Limited (600688.SH). Other related targets include North Huajin Chemical Industries Co.,Ltd. (000059.SZ).
Risk factors: Rapid deployment of new capacity; policy implementation falling short of expectations; significant oil price decline.
Comments