China's ethylene surge could spell more pain for US, European chemical firms

By Tanay Dhumal

Sept 22 (Reuters) - China's swift production ramp-up of ethylene, a crucial component for plastics, packaging and construction, is expected to drive down global prices and weigh on U.S. and European chemical manufacturers already grappling with oversupply and weak demand.

Domestic demand in China too is faltering as property investment weakens amid a broader economic slowdown. That could lead to Chinese ethylene flooding global markets, delaying a recovery in prices, analysts said.

The world's second-largest economy operates more than 54 million tonnes per year (MMtpa) of ethylene capacity and is projected to rise about 9% of global 2024 capacity by 2030, to beyond 75 Mtpa, according to Vertical Research Partners.

China has “been under a gun to get capacity up by 2030,” Dow CEO Jim Fitterling said at a Morgan Stanley conference this month.

U.S. producers including Dow DOW.N, Celanese CE.N and LyondellBasell LYB.N have seen profits erode as prices fall.

High production costs and aging plants are squeezing European producers, increasing reliance on imports of primary chemicals like ethylene and propylene.

China's decision not to cancel some major projects earlier in the downturn has extended the slump, said Garrie Li of S&P Global Commodity Insights.

Capacity growth is expected to outpace demand growth.

China's rapid petrochemical growth raises concerns about global market overproduction, LyondellBasell CEO Peter Vanacker said.

China's property sector, a heavy petrochemical consumer, remains weak, with investment down 12% in the first seven months of 2025.

"if demand in China falls short of the capacity build and then China would likely export," Morningstar analyst Seth Goldstein said, adding that it would pressure European production and North American capacity.

China's polypropylene exports jumped from 1.3 million tonnes in 2023 to 2.4 million in 2024, and could reach 3.2–3.4 million tonnes by 2026, S&P data showed.

The European Chemical Industry Council, Cefic, said China’s low-cost model made it the EU27’s largest chemical supplier, with shipments worth more than 17 billion euros ($19.97 billion) in the first half of 2025.

The risk of market flooding "is real," Cefic's Sylvie Lemoine said.