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

This capacity exit plan was finalized long ago; the situation in the Middle East is not the root result in 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 to extensive 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 have become the region with the strongest intensity of capacity contraction in this round.

regional 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 manufacturing 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 to exit approaches 4 million tons. From a time perspective, the shutdown rhythms of Japan and South Korea are highly overlapping, with a substantial number of units permanently exiting in 2027, and the extensive capacity clearance in the region basically concluding in 2028.

thorough 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 development rate has been maintained within 0.5% annually, while the annual development rate of terminal consumption reaches 2.5%, with consumption increments continuing to build up. The global ethylene capacity landscape continues to restructure, with the share of China's market capacity steadily growing, while the market share of Europe, Japan, and South Korea continues to shrink.

Looking at domestic ethylene capacity planning, the domestic ethylene capacity plans to 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, efficiently addition might 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, however 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 efficiently new capacity of the same scale simultaneously, making the gap difficult to fill rapidly.

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