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
German chemical industry power demand could resume fall
German chemical industry power demand could resume fall
London, 30 April (Argus) — Power consumption in the German chemical manufacturing sector has fallen sharply over the past decade and could continue to decline in the coming years unless structural reforms are implemented quickly, chemical industry association VCI executive director for sustainability, energy and climate policy Matthias Belitz told Argus . Power consumption in the manufacturing of chemical products totalled 42.79TWh in 2024, according to the latest data from statistical office Destatis, making up more than 9pc of total electricity consumption. But consumption in the sector has dropped by nearly 20pc on 2014-18 levels, and in 2024 was the second lowest for any year since at least 2008, only behind 2023 ( see consumption chart ). A fall in overall chemical production has been a key driver in the power consumption decline, Belitz said. Chemical production fell by 3.3pc on the year in 2025 and was down by about 21pc on 2021, VCI figures show ( see production chart ). Chemical plants totalling 9pc of European production capacity have closed since 2022, with 25pc in Germany, a report commissioned by European chemical industry body Cefic earlier this year showed. Belitz attributed the recent woes in the German chemical industry to global overcapacity, overly complex bureaucracy and high energy costs. Global chemical production capacity has risen sharply in recent years, with particularly strong growth in China and the Middle East, while demand for basic chemicals has largely stagnated. This shift in supply-demand balance has weakened the German industry, and the Middle East conflict will "undoubtedly" have "negative consequences", Belitz said. The business climate in the German chemical industry "deteriorated significantly" in March, according to the latest survey conducted by German economic research institute Ifo. Share of power consumption stagnant Power's share of total energy consumption in the chemical industry fell narrowly on the year in 2024 to 25.1pc and was slightly below the 2008-23 average, the latest Destatis data show. An electrification investment incentive is currently "lacking", Belitz said. Electricity is too expensive, making large-scale electrification unviable without significant policy changes. And in a highly uncertain environment, it is difficult for firms to make long-term investment decisions, he added. Energy-intensive industry association VIK's index for average industrial power prices — tracking wholesale developments — stood at 309 points in March, against a January 2002 baseline of 100 points, with the rise well outpacing inflation. By contrast, the index was consistently below 200 in 2009-20. Belitz also pointed to the lack of physical availability of grid connections. Obtaining grid connections can take 5-10 years, further complicating the electrifying process. ‘Structural reforms' required to boost power demand To prevent further plant closures and enable electrification, "structural reforms" are urgently needed, Belitz said, including lowering overall power system costs, synchronising renewables expansion with grid expansion and ensuring consistently lower all-in electricity costs. "We need the physical pre-requisites regarding the grid and we need solutions for times when renewables are not producing," Belitz said, arguing that "expanding renewables capacity alone is not enough" but that "it is important that the availability of renewable energy is perpetuated". German chemical company BASF echoed this sentiment. "Politically induced costs must be reduced," a BASF spokesperson told Argus , urging a "faster, co-ordinated expansion of renewable electricity and grids", while also demanding a "fundamental ETS [emissions trading system] reform". The EU ETS puts Europe at an "enormous" disadvantage, Belitz said. Other regions have followed Europe's emissions pricing at "a significantly slower pace than expected and also with a much lower magnitude". Chinese firms, for example, pay roughly one tenth of Europe's CO2 emissions costs, and not all sites are liable, Belitz said. BASF last month opened its Zhanjiang Verbund chemical production site in China, into which it invested €8.7bn. The site's construction aligns with BASF's strategy of "investing where we see opportunities for growth", a spokesperson told Argus . China recorded 45.7pc of global turnover in the chemical industry in 2024, according to VCI data. China's 2024 chemical production was up by 26.6pc on 2021, while German production was down by nearly 19pc ( see international production chart ). And the carbon border adjustment mechanism (CBAM), intended to safeguard European industry and prevent carbon leakage, is "unsuitable for protecting our companies in international competition", Belitz said. The complexity in the industry is too high, meaning CBAM will "constantly lag behind the reality" and generate massive bureaucracy. CBAM currently does not apply to the vast majority of chemicals, although they are likely to be included in the future. Government subsidies only a ‘temporary fix' Government measures to subsidise industry, including the industry power price and an expansion of the power price compensation, are "merely a temporary fix", Belitz said. The industry power price will relieve beneficiaries of 50pc of the yearly average wholesale price in 2026-28, although only down to €50/MWh, while the power price compensation expansion aims to slightly boost aid for firms' incurred indirect emissions costs as part of their electricity costs. These measures provide some short-term relief, but more structural solutions are required to keep industry afloat. "The government cannot subsidise permanently, it will not work," Belitz said. These instruments alone are "insufficient to sustainably restore competitiveness", BASF said. Power consumption is expected to rise significantly in the long term, despite stagnation in recent years, Belitz said, citing the Chemistry4Climate study last updated in 2024. Power consumption across chemicals and pharmaceuticals, with the former making up the vast majority, could reach 160-440TWh by 2045, according to the study, assuming climate neutrality and strongly depending on how much hydrogen will be imported, although Belitz said we "must acknowledge that we will not end up in an all-electric world". In the near term, power consumption in the chemical industrial sector is likely to continue dropping, owing to further falls in production, unless structural reforms in the energy and regulatory sectors take effect promptly. By John Horstmann German chemical industry consumption by year German chemical industry, production, electricity, gas consumption index 2014=100 International chemical production index 2014=100 German chemical industry 2008-24 average energy consumption % Send comments and request more information at feedback@argusmedia.com Copyright © 2026. Argus Media group . All rights reserved.
UAE's Borouge starts up Al Ruwais polymers project
UAE's Borouge starts up Al Ruwais polymers project
Singapore, 30 April (Argus) — UAE-based Borouge has started polymer production at its 1.4mn t/yr Borouge 4 megaproject in Abu Dhabi's Al Ruwais Industrial city from early April. The XLPE 2 unit, which produces cross-linked polyethylene, was the first to start production, the company said today in a filing to the Abu Dhabi Securities Exchange. Output at Borouge 4 will be ramped up through 2026 as the remaining units are commissioned. Once fully online, Borouge 4 is expected to lift the company's total polymers capacity by 28pc to 6.4mn t/yr, making the Al Ruwais complex one of the world's largest single-site polyolefins facilities. Output from the project will primarily target India and China — Asia's largest petrochemical markets. The start-up comes as Borouge works to normalise operations after halting production at some units following damage caused by falling debris from drone attacks. The initial repairs have been completed on affected lines and, following a phased restart, most units are now online, with utilisation increasing. The company's sales volumes over January-March fell by 13pc year on year, partly due to the closure of the strait of Hormuz, Borouge said. It was able to export 61pc of its March production volumes via alternative routes, it added. By Sourasis Bose Send comments and request more information at feedback@argusmedia.com Copyright © 2026. Argus Media group . All rights reserved.
Natureworks opens 75,000 t/yr PLA site in Thailand
Natureworks opens 75,000 t/yr PLA site in Thailand
Singapore, 30 April (Argus) — Polylactic acid (PLA) producer Natureworks has opened its second site with a 75,000 t/yr capacity project in Nakhon Sawan, Thailand, that uses sugarcane as a feedstock. The site will use locally sourced sugarcane to produce lactide monomer that can then be polymerised on site to PLA, according to the company. The product will be used across different sectors such as packaging, fibres and consumer applications, it added. The company is jointly owned by US-based Cargill and Thailand-based PTT Global Chemical. Natureworks also operates a 150,000 t/yr plant in Blair, Nebraska, in the US. With both sites, Natureworks is now the first company to have more than one PLA production facility globally, it said. By George Barsted Send comments and request more information at feedback@argusmedia.com Copyright © 2026. Argus Media group . All rights reserved.
Divisions deepen over carbon pricing ahead of IMO talks
Divisions deepen over carbon pricing ahead of IMO talks
Dubai, 27 April (Argus) — Shipping industry groups and governments enter a critical round of talks at the International Maritime Organisation (IMO) this week facing deepening divisions over how to cut emissions, with no clear consensus on the design or cost of decarbonisation. The 84th meeting of the IMO's Marine Environment Protection Committee (MEPC), being held in London, follows a previous meeting in October that ended without agreement on a global emissions framework. IMO secretary=general Arsenio Dominguez later described the outcome as a "small setback", while stressing that the sector's decarbonisation efforts remain on track. At the centre of the dispute is the proposed net-zero framework (NZF), which includes a carbon pricing mechanism intended to accelerate the shift to low-emission fuels. Supporters see the framework as a necessary investment signal, while critics warn it would impose costs the sector is not yet equipped to absorb. A coalition spanning shipowners, shipping companies and ship registries — including Liberia, Panama and the Marshall Islands, which together account for a large share of the global fleet — has called for alternative approaches to be considered. The group has warned that support for the NZF "in its current form" has eroded. It is pushing for a more flexible, technology-neutral framework that would allow continued use of transitional fuels such as LNG and biofuels, while avoiding penalty-based mechanisms that could raise costs for operators and consumers. In contrast, a separate coalition of ports, logistics firms and clean fuel developers has urged governments to adopt the NZF, arguing that further delays would undermine investment in alternative fuels and slow the energy transition. The divergence highlights a deeper split within the shipping ecosystem. Shipowners and flag states are prioritising cost, fuel availability and operational feasibility at a time of heightened disruption in energy markets caused by the Iran war, while fuel suppliers and infrastructure developers are seeking regulatory certainty to underpin long-term investments. EU countries are expected to continue backing a carbon levy. The US has opposed such measures, which contributed to the postponement of a decision at last year's IMO meeting. Dominguez has also pointed to the current geopolitical environment — including disruptions to energy markets and shipping routes — as reinforcing the need to balance energy security, affordability and sustainability, a dynamic increasingly shaping the sector's approach to decarbonisation. Industry sources aligned with developing countries within the IMO told Argus that proposals based on carbon pricing or penalty mechanisms risk distorting trade flows and placing a disproportionate burden on emerging economies. They instead favour a more "pragmatic" and technology-neutral approach that reflects differing levels of fuel availability, infrastructure and economic capacity. The sources added that support from major flag states is procedurally significant, noting that backing from countries representing a large share of the global fleet will be critical to reaching any agreement. The result is a negotiation that is as much about cost allocation and regulatory design as it is about climate ambition. With no final decision expected at this week's meeting, discussions are likely to extend through the year, leaving shipowners, fuel producers and investors facing continued uncertainty over the future regulatory framework. Shipping accounts for around 3pc of global emissions and carries roughly 80pc of world trade, underscoring the importance of the IMO process for global energy markets and supply chains. By Bachar Halabi Send comments and request more information at feedback@argusmedia.com Copyright © 2026. Argus Media group . All rights reserved.