Formosa Petrochemical's Olefin Plant Fully Resumes Production; Landscape of Asian Olefins and Plastic Feedstocks Shifts

Recently, Formosa Petrochemical's Olefins Division officially issued a notice lifting the previously effective force majeure clause, and its olefin cracking units have achieved full-load resumption of production.

As a key supplier of olefins and plastic raw materials in Asia, this comprehensive resumption of production will reshape the supply landscape of the ethylene and propylene markets in East Asia, exerting significant influence on the spot and futures prices of upstream and downstream products such as PE, PP, and styrene.

It is understood that Formosa Petrochemical's Mailiao Olefin Cracking Unit declared force majeure starting from March 9, 2026. Affected by geopolitical conflicts in the Middle East, shipping through the Strait of Hormuz was obstructed. Since about two-thirds of Formosa Petrochemical's production raw material, naphtha, relies on imports from the Middle East, the interruption of raw material arrivals at the port directly restricted the unit's production.

Data shows that the unit has an annual ethylene capacity of 2.93 million tons and an annual propylene capacity of 2.43 million tons. During the restriction period, the unit maintained operation at minimum load, with the operating rate once dropping to between 32% and 50%.Affected by the upstream constraints, the enterprise's downstream products such as PE, PP, PVC, and styrene simultaneously triggered supply force majeure. Spot prices for olefins and plastic raw materials in Asia saw a phased increase, and the supply of imported plastic raw materials domestically remained consistently tight.

With the resumption of navigation in Middle East waterways, naphtha transport cargoes have successively arrived at the port, and Formosa Petrochemical has initiated phased production ramp-up work.

The unit began to gradually increase its operating load starting from mid-to-late May. By early June, the entire olefin cracking unit had resumed full production, and the fulfillment of long-term contracts for external sales of ethylene and propylene, as well as spot shipments, have fully returned to normal. Meanwhile, the enterprise's supporting aromatic hydrocarbon units such as benzene, toluene, and PX, as well as the 1.32 million tons/year styrene unit, simultaneously lifted production restrictions, effectively alleviating the tight supply situation of chemical fiber raw materials.

The increase in supply volume has also driven significant changes in prices across the industrial chain.

The increase in ethylene supply in Asia has put downward pressure on regional spot prices. The supply of Formosa PE products for external sales continues to grow, and the volume of imported PE arriving domestically has risen, further suppressing the upward room for domestic PE prices, with market spot highs beginning to retreat. In the propylene market, coupled with the centralized restart of multiple domestic PDH units, the Asian propylene supply has shifted from tight to loose. After the supplement of imported PP supplies arrived, the market's momentum for price increases faded, and product spreads gradually narrowed. Furthermore, the full release of Formosa's million-ton-level styrene capacity has quickly filled the previous supply gap in the Asian market, driving down costs for styrene and downstream EPS, with prices overall weakening.

Industry analysis indicates that at this stage, with Formosa Petrochemical combined with the concentrated resumption of production at Korea's YNCC and multiple cracking units in Singapore, the Asian olefin market has officially shifted from supply shortage to supply surplus. Coupled with the simultaneous decline in naphtha prices, the overall production cost of the industrial chain has moved downward, becoming a major bearish factor for the market. However, current rigid demand for downstream plastic products remains stable, and some domestic refining and chemical units have entered routine maintenance stages, which will form some support for prices. It is expected that the room for significant price declines in related products is limited, and the overall trend will be volatile and weak.

In terms of cargo circulation, relevant imported raw materials from Formosa are continuously being transported to domestic East China and South China markets. The increased enthusiasm of traders for replenishing stocks also puts domestic plastic raw materials under certain pressure in price competition.