Steam cracker capacity addition: relief in sight
Global steam cracker operating rates have been trending downward from 89pc in 2018 to 79pc in 2023, driven by the combination of high-capacity increase and slower economic growth in recent years.
In Argus's latest Ethylene Analytics, a recovery is forecast to take place in the coming years as the recent wave of new capacity cools off, absorbing demand growth before the second wave of capacity addition outgrows demand from 2027-2029. This recovery is based on a modelled assumption of modest growth in the global economy and a slowdown in capacity expansion. Historically, olefins demand growth has trended in line with GDP growth on a global basis; in recent years this relationship has disconnected. This was a result of the imbalance between the service and manufacturing industries, but we anticipate the trend will revert sooner or later moving forward.
The petrochemical industry is experiencing high levels of upcoming capacity over the next five years. On a global level, ethylene and propylene capacity is expected to increase by 47.4mn t (4pc) and 44.0mn t (5pc), respectively, over the next five years while global capacity growth from 2018 to 2023 averaged at 4.5pc/yr for both ethylene and propylene. Most investment in ethylene production has gone into steam crackers where ethylene is the main product and propylene is produced as a co-product. Propylene will see a high-capacity increase from not only steam crackers but also from propane dehydrogenation (PDH) projects, which will delay the recovery of global propylene operating rates.
The first wave of ethylene capacity addition is cooling off, but a second wave is expected to kick off in 2026. However, propylene is currently undergoing its wave of capacity addition before seeing a slowdown from 2028 onward. On the propylene side of the olefins chain, 50pc of the upcoming capacity will come from PDH, 34pc from steam crackers and the rest will be a combination of sources from refinery, coal, and methanol.
Operating rates in all regions are being negatively impacted by the combination of high-capacity increase and slower global economic growth. Olefins demand has experienced slower growth over the past two years, with negative growth in 2022 as a result of high inflation and lower consumer spending.
Based on current market fundamentals there have been project delays across most regions and also rationalisation from uncompetitive units. With steam crackers running at lower-than-normal operating rates, rationalization of capacities is a significant unknown as what assets are to shut down are dependent on many factors such as company financials, politics, and integration factors. This makes the rationalization of specific units tough to predict.
As western nations are experiencing slower GDP growth, developing nations will be the key regions for olefins growth. We are seeing a slowdown in Chinese and northeast Asian GDP, but south Asian GDP has been holding strong. Polymer demand, which accounts for more than half of olefins consumption will be the main driver of olefins demand (65pc of ethylene gets consumed into PE and 71pc of propylene gets consumed into PP globally). From a supply perspective, 17pc (8mn t) of all upcoming cracker projects have yet to start construction, which will give operating rates a boost if delayed. Given the slowdown in global economic growth in the past two years, high interest rates, and inflation, the overall outlook is fairly bearish. Consumer spending, household disposable income, economic growth, project timelines, and rationalization from uncompetitive production facilities will be the main indicators of how quickly it will take for operating rates to recover.
Current announced projects
In the past five years, most steam cracker capacity increases took place in China and the trend is expected to persist over the next five years based on announced projects, but most regions are investing. Other Asian countries such as India, South Korea, Vietnam, and Indonesia are also investing. A total of 25.6mn t and 32.9mn t of ethylene and propylene capacity is expected to come online in China over the next five years. Below is the summary of upcoming stream cracker projects globally.
Chinese projects that are currently under construction include Wanhua Chemial, Yulongdao Refining & Petrochemical, Sinopec, Jilin Petrochemical and more. Joint venture steam cracker projects in China between domestic producers and multinational corporations have also started construction which includes Sabic-Fujian Petrochemical, Ineos Sinopec Tianjin, Shell CNOOC Petrochemical, BASF Zhanjiang, and ExxonMobil. These projects will increase ethylene capacity by 21.8mn t over the upcoming five years. Asian nations excluding China includes S-oil South Korea, Hindustan Petroleum India, Lotte Chemical Indonesia have also started construction which totals 5.2mn t of ethylene capacity.
Borouge, SATORP and a joint venture between CP Chem and Qatar Energy in the Middle East are also investing in new crackers with a total capacity addition of 5.2mn t. In Europe, Ineos Project One and PKN Orlen have announced projects while Sabic UK invested in a green project. The Sabic project involves restarting and converting its current cracker to run on hydrogen.
Russia has steam cracker projects slated to start up in the five-year span, including Nizhnekamskneftekhim, Irkutsk Oil, Baltic Chemical, and Amur GCC while Uzbekistan has also announced an expansion from Gas Chemical Complex. North America has three projects slated to come on over the next five years that will increase its capacity by 3.6mn t. North American projects include Shintech US, Joint venture CP Chem Qatar Energy, and Dow in Canada.
Argus’s Ethylene Analytics includes a global plant-level capacity dataset detailing expected project timelines.
Author: Dhanish Kalayarasu
Date: 15/05/2024
Spotlight content
Related news
Michelin restructures US tire manufacturing footprint
Michelin restructures US tire manufacturing footprint
Houston, 26 June (Argus) — Michelin North America will restructure its US manufacturing operations, with plans to consolidate production between two tire plants. The company informed stakeholders on 25 June that it will close its passenger car and light truck tire plant in Tuscaloosa, Alabama, starting in early 2027 and concluding by year-end 2028. Operations at the site have been temporarily idled until 29 June, as details are communicated to employees. Tire production and rubber-mixing at Tuscaloosa will be phased out over the next two years. About 1,200 workers at the site will be affected, with union leaders set to begin discussions on severance packages. At the same time, Michelin aims to shift nearly all production from its BFGoodrich Tires brand line to its Fort Wayne, Indiana, passenger car and light truck tire plant. "Due to the size, footprint and infrastructure of the Fort Wayne factory, the site is better positioned to consolidate the capacity and meet future demands for the success of BFGoodrich Tires," said Terry Redmile, senior vice president for manufacturing operations in the Americas. The move targets structural inefficiencies, particularly underutilization, that have weighed on the long-term sustainability of Michelin's North American manufacturing operations. The company added that its core recreation/off-the-road tire portfolio continues to faces competitive pressures despite maintaining market share and performance benchmarks. Michelin operates 34 industrial plants across the US and Canada, with production tailored to a wide range of tire segments, such as passenger vehicles, light and heavy trucks and specialty applications for aviation, agriculture and earthmoving equipment, according to a company fact sheet. By Joshua Himelfarb Send comments and request more information at feedback@argusmedia.com Copyright © 2026. Argus Media group . All rights reserved.
India restores industrial LPG supply as imports rise
India restores industrial LPG supply as imports rise
New Delhi, 26 June (Argus) — The Indian government has restored LPG supplies to industrial and commercial consumers to pre-war levels, supported by rising imports this month, according to a government notification issued late on 25 June. New Delhi has also directed refiners to limit the diversion of propane and butane streams to LPG production and use them instead as petrochemical feedstock, reversing its earlier mandate to prioritise LPG output, the notification added. The shift in policy has come on the back of India's rising LPG imports from the US, Kpler data show. India is set to receive its highest volume of US LPG this month at 1.09mn t, making up 60pc of overall LPG imports, predictive volumes from Kpler show. The US volumes include both term and spot cargoes booked by Indian importers over the last two months. Supplies from Middle East also increased in June and currently total at 617,000t, up from 381,000t in May, but lower from 1.69mn t in February before the war started, Kpler data show. Shipments from the UAE are set to hit 224,000t in June — the second highest supplier after the US. The UAE has been using shuttle vessels to move LPG from Adnoc's Ruwais terminal to Sohar in Oman, where it gets transferred to larger gas carriers. India-bound Very Large Gas Carrier (VLGC), NV Sunshine, is carrying over 44,000t of LPG for state-run Indian Oil (IOC) for delivery at Dahej on 28 June, after conducting a ship-to-ship transfer on 16 June at Sohar in Oman, Vortexa and Kpler data show. Most of India's LPG imports from the Middle East are undergoing ship-to-ship transfers near Sohar in Oman or the Gulf of Kutch near India, the data show. Industrial demand Typically, India's industrial LPG demand stands at 2.9mn t/yr, accounting for 9pc of the country's total LPG demand across sectors including hospitality, food services, agriculture, manufacturing, pharmaceuticals, healthcare and education. In May, industrial LPG consumption was at 195,100t, down by 12.6pc on the year, but up by 4pc on the month, as supplies were restored to some extent, Indian oil ministry data show. Bulk LPG supplies — delivered by tanker truck and stored on-site in large pressure vessels — to manufacturing, processing and refining users have been restored to 50pc of pre-war levels, the notification said. India's annualised bulk LPG demand stands at 1.1mn t, or 3pc of overall LPG demand. Bulk LPG supplies totalled 10,800t in May, down by 83pc on the year and 9pc on the month, oil ministry data show. New Delhi has also said the increased allocation of propane and butane streams for non-LPG uses will proceed without affecting domestic LPG availability, while keeping aggregate indigenous LPG production at no less than 40,000t/d. Domestic LPG production had reached 52,000 t/d in May up from 50,000 t/d in April, a government official told reporters in New Delhi. Support for petrochemicals The new order will help raise output of key petrochemicals, including polypropylene (PP). Supplies of packaging material have remained tight, prompting Indian buyers to source from exporters in China and southeast Asia. About 80pc of India's PP output was hit by feedstock curbs, Argus estimates show. Normalised feedstock supplies will allow several petrochemical plants, such as Mangalore Refinery and Petrochemicals (MRPL), to restart PP units. But an Indian producer said it would still take some time for domestic supplies to reach pre-war levels. The easing of restrictions could also prompt the Indian government to reinstate import duties on petrochemicals, as prices in other parts of Asia have receded, a Mumbai-based trader said. In April, New Delhi waived customs duties on 40 petrochemical products, including polyethylene (PE), polyvinyl chloride (PVC) and PP, to offset extra costs for domestic industries. PP buying in the industrial belts of Morbi and Rajkot in Gujarat have slowed as an immediate impact, another Indian producer said. Argus assessed PP raffia prices at $1,180-1,270/t cfr India for the week to 19 June, down from $1,350-1,430/t cfr India on 10 April. Argus assessed linear low-density polyethylene (LLDPE) prices at $1,210-1,270/t cfr India for the week to 5 June, compared with $1,430-1,500/t cfr India on 10 April. By Rituparna Ghosh and Sourasis Bose Send comments and request more information at feedback@argusmedia.com Copyright © 2026. Argus Media group . All rights reserved.
Heartland Polymers shuts Canadian PP unit
Heartland Polymers shuts Canadian PP unit
Houston, 25 June (Argus) — Heartland Polymers shut down its 525,000 t/yr polypropylene (PP) unit in Alberta, Canada, this week, a source close to the company said today. Though the PP unit is down, the company's propane dehydrogenation (PDH) unit is still operational, and the company is able to store propylene, the source said. So far, customers have faced no disruption to orders, but market participants said if the situation lasts longer than a few days, there is the potential for reduced allocations. It was not immediately clear what caused the upset or how long the plant was expected to be down. Some market participants said they heard the outage could last as long as 2-3 weeks. While there have been no major supply concerns in the North American PP market, sources said a long outage, combined with other outages and turnaround activity, could begin to tighten supplies. By Michelle Klump Send comments and request more information at feedback@argusmedia.com Copyright © 2026. Argus Media group . All rights reserved.
Braskem starts creditor mediation, seeks relief
Braskem starts creditor mediation, seeks relief
Sao Paulo, 25 June (Argus) — Brazilian petrochemical giant Braskem has initiated a mediation process with financial creditors and filed for precautionary urgent relief in a Sao Paulo court, aiming to stabilize negotiations around a consensual and orderly capital restructuring, while maintaining normal operations and honoring obligations to suppliers and clients. The move formalizes a strategy already outlined in the company's materials, which frame the restructuring as a strictly financial exercise focused on capital markets and bank creditors, without affecting trade liabilities or day-to-day operations. The legal steps effectively create a protected environment for negotiations, similar to a standstill, and are consistent with the planned use of Brazil's out-of-court restructuring mechanism designed to bind creditor classes while avoiding a full judicial recovery process. At the heart of Braskem's proposal is a liability management exercise aimed at extending maturities and preserving liquidity rather than imposing losses. The company has proposed a five-year extension of debt maturities, combined with temporary cash interest relief through mechanisms such as payment-in-kind interest options until 2028 and a 200-basis-point coupon reduction across instruments. Importantly, the framework avoids principal haircuts and debt-to-equity conversion, maintaining all obligations as unsecured and preserving the existing capital structure. This creditor-friendly positioning on principal contrasts with a more aggressive stance on cash flow relief, highlighting Braskem's focus on near-term liquidity. The plan also avoids new money issuance and asset encumbrance, reinforcing management's intent to retain operational flexibility while navigating a weaker petrochemical cycle. Liquidity preservation is further supported by a proposed committed letters of credit facility of up to $1.5bn, combining existing exposures with incremental commitments from participating banks. This facility is critical for sustaining trade flows and import financing, particularly given the company's reliance on global feedstock and product markets. It also underpins Braskem's messaging that the restructuring is centered around financial liabilities and does not compromise its commercial relationships. However, creditor reaction suggests that reaching a consensual outcome may prove challenging. The steering committee of an ad hoc creditor group has rejected the initial proposal as inadequate, particularly criticizing the idea of coupon reductions, which they argue fail to compensate investors for increased credit risk and maturity extensions. Creditors are instead pushing for improved economics, including potentially higher coupons or other forms of value compensation, as well as stronger safeguards on cash usage and capital allocation during the negotiation period. This divergence points to a fundamental tension over burden sharing between creditors and shareholders. While Braskem's proposal minimizes dilution and avoids principal impairment, creditors are demanding a structure that delivers positive net present value impact and reflects the company's risk profile. Their position also includes expectations for tighter governance, restrictions on non-ordinary course transactions and greater transparency during the process. Operational projections included in the materials indicate a gradual recovery in Ebitda over the medium term, supporting the argument that Braskem faces a cyclical liquidity challenge rather than structural insolvency. Nevertheless, margins are expected to remain below historical highs, reinforcing the need for balance sheet flexibility and disciplined capital allocation. Overall, the mediation and court filing mark the transition from informal discussions to a structured restructuring process. While the framework provides a clear path to implementation, including creditor engagement, plan refinement and eventual court approval, the outcome will hinge on bridging the gap between Braskem's liquidity-driven approach and creditor demands for stronger economic compensation. By Fred Fernandes Send comments and request more information at feedback@argusmedia.com Copyright © 2026. Argus Media group . All rights reserved.