A 15 million ton ethylene gap is looming! South Korea, Japan, and Europe are significantly reducing ethylene production capacity.

The global ethylene market landscape is undergoing a major restructuring, with the accelerated shutdown of large-scale refining and chemical plants in traditional ethylene production regions such as Europe, South Korea, and Japan.

This capacity exit plan was finalized long ago; the situation in the Middle East is not the root cause of the capacity reduction. Rising oil prices and tightening raw material supplies have further acted as catalysts, compressing the original five-year shutdown plan into a concentrated implementation within 1.5—2 years. The window for large-scale capacity exit is concentrated in the second half of 2026 to the first half of 2027.

Overview of Ethylene Capacity Exit Plans in Europe, America, and Asia

South Korea has become the region with the strongest intensity of capacity contraction in this round.

Local existing ethylene capacity is 12.8 million tons; within five years, nearly 6 million tons will be cut, a capacity reduction of 45%.

Upon completion of capacity adjustment, South Korea's ethylene capacity will remain only 6.87 million tons. The facilities to be shut down are distributed across the three major chemical industrial parks of Ulsan, Yeosu, and Daesan, covering mainstream chemical companies such as SK, YNCC, LG, Lotte, and Hanwha. Among them, the capacity scale promoted by the South Korean government for exit approaches 4 million tons. From a time perspective, the shutdown rhythms of Japan and South Korea are highly overlapping, with a large number of units permanently exiting in 2027, and the large-scale capacity clearance in the region basically concluding in 2028.

Comprehensive calculations indicate that the three regions of Europe, South Korea, and Japan will form a combined loss of close to 15 million tons of ethylene capacity, with supply contraction pressure intensively released in the second half of 2026 to the first half of 2027.

Mismatch in the pace of new domestic capacity launch; the ten-million-ton gap is hard to fill in the short term

The contradiction between supply and demand in the global ethylene market continues to be prominent. Data shows that in recent years, the global ethylene capacity growth rate has been maintained within 0.5% annually, while the annual growth rate of terminal consumption reaches 2.5%, with consumption increments continuing to accumulate. The global ethylene capacity landscape continues to restructure, with the share of China's market capacity steadily increasing, while the market share of Europe, Japan, and South Korea continues to shrink.

Looking at domestic ethylene capacity planning, the domestic ethylene capacity plans for 2025—2030 are as follows:

•2025: 57.8 million tons (base)

•2026: 63 million tons, planned addition of approx. 6 million tons, projects face delays, actual production scale falls short of expectations

•2027: 69 million tons, book addition of 6 million tons, units mostly concentrated in commissioning in the second half, effective addition may only be around 3 million tons

•2028: 74 million tons, addition of approx. 5 million tons, a batch of units from the "13th Five-Year Plan" gradually land

•2029: 76.3 million tons, addition of approx. 2 million tons

•2030: 79 million tons, addition of approx. 3 million tons, after which new projects decrease significantly

In the medium to long term, the scale of new domestic ethylene capacity in the next ten years exceeds 20 million tons, but the pace of capacity launch is clearly misaligned with the pace of overseas capacity exit. During the phase when overseas intensively releases a 15 million-ton supply gap, domestic capacity cannot form an effective new capacity of the same scale simultaneously, making the gap difficult to fill quickly.

Industry analysis points out that this active exit of overseas refining and chemical capacity belongs to long-term industrial planning, and geopolitical conflicts have accelerated the capacity clearance process. Under the supply-demand mismatch pattern, markets for ethylene as well as downstream supporting chemical products like propylene and aromatics will continue to receive support, and the profit distribution of the upstream and downstream industrial chains as well as trade flows may usher in long-term adjustments.