Disruption of raw material supply in the Middle East causes global ethylene market turbulence.

In March 2026, due to geopolitical conflicts in the Middle East disrupting the supply of naphtha and other raw materials, the global ethylene industry experienced severe shocks, with the Asian market becoming the hardest-hit region. Ethylene prices surged dramatically within a short period, leading to significant contractions in production capacity and output for many enterprises. Chemical giants worldwide adopted measures such as halting production, reducing output, or adjusting prices, causing drastic changes in the global ethylene supply-demand landscape. The supply-demand imbalance is expected to persist in the short term.

Price Trends: Global Prices Soar with Synchronized Increases in Domestic and International Markets

Influenced by multiple factors, including raw material shortages and production capacity contractions, global ethylene and related downstream product prices witnessed widespread increases. The Asian market experienced particularly notable hikes, while international markets also saw varying degrees of price upticks.

In Asia, ethylene prices surged dramatically within just three weeks. As of the close on March 19, CFR Northeast Asia ethylene prices climbed to above $1,351 per ton, nearly doubling from the early-month low of $696. By March 18, CFR Northeast Asia and Southeast Asia ethylene prices had risen to $1,280 per ton, with a single-day increase of up to $80 per ton and a cumulative rise of approximately 80% since late February. Domestic markets followed suit, with East China ethylene spot prices breaking through 9,700 yuan per ton, marking a cumulative increase of about 65% since late February and reaching the highest level since April 2022.

The sharp rise in ethylene prices also drove up downstream product prices, prompting domestic and international chemical companies to issue frequent price hike notices.

In the domestic market, Wanhua Chemical raised acrylic acid prices in East China by 300 yuan per ton to 12,350 yuan per ton. Companies like Lihuayi and Luxi Chemical increased isooctanol prices by 500 yuan per ton, while propylene oxide saw a 400 yuan per ton increase.

Internationally, Dow Chemical (U.S.) raised polyethylene prices by up to 100%, BASF increased prices for basic amine products by up to 30%, and Covestro (Shanghai) raised polyurethane product prices by 30%. Lanxess announced hikes of up to 50% for some flame retardants and plasticizers, while Toray increased prices for nylon and PBT products by 2,500-3,500 yuan per ton. Chemours raised titanium dioxide prices by $150 per metric ton. Japan's Tosoh Corporation also announced price increases for polyethylene resin products due to supply chain fluctuations and rising costs.

Production Capacity and Output: Major Contractions in Asia’s Core Production Regions with Japan’s Output Hitting Record Lows

As a core region for ethylene production, Asia experienced widespread declines in operational rates and significant contractions in production capacity and output due to naphtha supply shortages. Japan and South Korea were among the hardest-hit countries.

In Japan, which relies heavily on imported naphtha with about 40% sourced from the Middle East, naphtha cracking units were forced to reduce operations due to the Middle East situation. Data from the Japan Petrochemical Industry Association showed that the average operational rate of naphtha cracking units in Japan fell to 75.7% in February 2026, the lowest since June 2025. Consequently, Japan’s ethylene output in February plummeted by 23% month-on-month to 334,200 tons, setting a new historical low.

Tosoh Corporation, Japan’s largest ethylene purchaser, adjusted the operational status of its ethylene production facilities, delaying the restart of regularly maintained units and implementing moderate output reductions at some facilities. Market analysts predict that if geopolitical tensions persist, Japan’s cracking unit operational rates could decline further.

South Korea, a major ethylene production base in Asia, also faced severe production capacity contractions. Yeosu NCC in South Korea risked a complete shutdown of its ethylene production chain due to disrupted Middle East raw material supplies. Meanwhile, YNCC, South Korea’s largest ethylene producer, is advancing capacity integration with Lotte Chemical, planning to permanently shut down its No. 3 unit (470,000 tons/year) and No. 2 unit (910,000 tons/year), retaining only the No. 1 unit (900,000 tons/year). This integration will reduce YNCC’s ethylene capacity by approximately 60%. Additionally, Lotte Chemical has reduced its operational rate to below 60%, with South Korea’s overall ethylene capacity contracting significantly due to both geopolitical factors and industrial restructuring.

Domestically, Sinopec CPDC announced an immediate temporary production halt. While primarily reducing caprolactam and PA6 capacity, this move also impacts the ethylene demand and supply dynamics upstream of the domestic polyamide industry chain.

Meanwhile, due to naphtha supply issues, the utilization rate of domestic naphtha cracking for ethylene production fell to 82.44%, a decline of 6.19 percentage points from pre-conflict levels, indicating an overall supply contraction. Formosa Plastics Corporation in Taiwan also issued a notice stating that, effective April 1, 2026, it would be unable to fully fulfill its original supply contract obligations, affecting multiple ethylene downstream products such as styrene monomer, further exacerbating regional supply tightness.

Additionally, European companies were also affected. With DORAMA’s two PET units (totaling 466,000 tons) declaring force majeure, the polyester supply chain faced constraints. Approximately 15% of global ethylene supply was directly impacted by this crisis.

Company Dynamics: Giants Halt or Reduce Production to Address the Crisis While Domestic Leaders Focus on High-End Capacity

In response to the severe volatility in the ethylene market, chemical companies worldwide adopted measures such as halting production, reducing output, and adjusting facility operations. Meanwhile, domestic industry leaders accelerated the deployment of high-end production capacity to enhance industrial competitiveness.

Regarding production halts and reductions, major players worldwide took frequent actions. Besides Sinopec CPDC’s temporary shutdown, Yeosu NCC’s risk of complete shutdown, and Tosoh’s output reductions, Formosa Plastics Corporation emerged as a core affected enterprise in Taiwan. Its inability to fulfill supply contracts for key aromatics and polyester raw materials such as benzene, toluene, xylene, and PTA will have ripple effects on downstream industries like chemical fibers and plastics. South Korea, while facing capacity contractions, is advancing structural industrial restructuring. YNCC, Lotte Chemical, Hanwha, and DL Chemical submitted the final plan for the "Yeosu No. 1 Project" business restructuring, aiming to integrate Yeosu’s ethylene capacity and establish a new integrated operating entity. This restructuring is a key step in South Korea’s policy to reduce petrochemical overcapacity, targeting a cut of 2.7–3.7 million tons of annual ethylene capacity. Geopolitically induced naphtha supply fluctuations have further accelerated this industrial upgrade.

In terms of domestic capacity deployment, PetroChina is accelerating the Dalian ethylene project. On March 18, the public inquiry and comparison procurement for construction condition demonstration consulting services for the Dalian Petrochemical (West Zhong Island) refining and chemical integration project was officially launched, marking a critical step toward project commencement. With a total investment of 68.5 billion yuan, the project is scheduled to start in 2026. It will include a new 1.2 million tons/year ethylene unit and downstream low-carbon olefin comprehensive utilization facilities, alongside high-end chemical units such as 400,000 tons/year PP and 200,000 tons/year POE. Upon completion, the project will enhance domestic supply capacity for high-end ethylene and downstream products, supporting the domestic chemical industry’s shift toward high-end and精细化 development while reducing reliance on imported high-end chemical products.

Industry insiders noted that the global chemical market has entered a dual cycle of "supply shortages + price increases." As a core raw material in the chemical industry chain, ethylene supply tightness is rapidly transmitting downstream to products such as PTA, PA6, PET, and PVC. Downstream industries like plastics, chemical fibers, and coatings will continue to face rising costs and raw material supply pressures. Future market trends will heavily depend on the recovery of Middle East raw material supplies, the progress of facility restarts, and geopolitical developments. The global ethylene industry chain may undergo significant restructuring as a result of this crisis.