S&P Global: Asia's Olefin Supply Surplus May Persist

At the recent 2025 Asia Pacific Petroleum Conference (APPEC) in Singapore, analysts from S&P Global indicated that the oversupply situation in Asia's olefins market may take three to four years to ease, with new capacity investments also slowing.

Paul Joo, Director of Olefins and Derivatives at S&P Global Commodity Insights, highlighted that Asian olefin margins have remained consistently negative in recent years. This is largely attributed to the shutdown of multiple steam crackers following the addition of more than 10 million tonnes per annum (mtpa) of ethylene capacity in Northeast Asia between 2024 and 2025.

'The chemical industry is emerging from years of challenges, but Asian olefin margins may not turn positive until after 2030,' Joo said.

Previous reports indicate that at least three naphtha cracking units in Japan are scheduled to be decommissioned by 2028, which would reduce the country’s ethylene production capacity by approximately 20%. Concurrently, South Korea is moving forward with a restructuring of its cracking sector, with the government requiring operators to submit facility details and proposing cuts to ethylene capacity ranging from 2.7 to 3.7 mtpa.

According to S&P Global data, Northeast Asian ethylene prices were stable at US$840 per tonne as of 10 September, while Japanese naphtha prices increased by US$6 per tonne to US$603.25 per tonne. The ethylene-naphtha spread stood at US$236.75 per tonne—below breakeven levels of US$250 per tonne for integrated producers and US$300–350 per tonne for non-integrated producers.

Joo projected that 6.5 mtpa of global ethylene capacity is expected to be decommissioned between 2020 and 2028. He also noted that Asian cracking units are increasingly considering switching from naphtha to ethane cracking due to ethane's cost competitiveness. Four ethane cracking units with a combined capacity of 4.15 mtpa are scheduled to come online in Asia and Europe between 2025 and 2027.

Additionally, Joo indicated that U.S. ethane supply may peak around 2035 before declining, while global demand for ethane continues to grow.

Andrew Neale, Vice President of Chemicals & Materials at S&P Global Commodity Insights, added that industry consolidation and efficiency improvements aimed at tackling global cracker overcapacity are expected to accelerate in 'high-cost regions' between 2026 and 2027.

Although approximately 4 mtpa of cracking capacity has recently been shut down, with another 1 mtpa at risk, Neale cautioned that unless more than 20 plants are closed, it will be difficult to significantly change the global supply situation. He also pointed out that while cracker shutdowns are rising in Europe, international producers will continue to expand olefins supply through projects in the U.S. and the Middle East, limiting the extent of global capacity reduction.