3 June, 2025 11:41:18 IST 
The challenges facing the Asian petrochemicals industry and the prospects of a recovery were the major talking points at the Asian Petrochemical Industry Conference (APIC) held in Bangkok, in May. Asia has been the key driver of petrochemical demand for most of the last two decades, and it is the slowing down in the region that is at the heart of the industry's travails. It stands to reason that any recovery – whenever it comes – will be determined in the region.
There are other challenges facing the petrochemical industry, notably the plastics industry, and at the top of the list are the sustainability-related ones. How the region handles the rising amounts of plastics waste generated at end-of-life of myriad products, particularly flexible packaging, will be shaped by regulations and will have implications for demand for virgin resins. There are rising expectations – from consumers and regulators – for greater environmental responsibility on the part of the plastics industry and stakeholders have long way to go to meet promises and goals.
It was no surprise that the ongoing tariff wars dominated discussions on the sidelines of APIC 2025. The situation is still very fluid but there is agreement that any which way this is bad for an industry that was amongst the first to globalise. Bilateral trade agreements that may be forged between nations will at best only partly make-up for the loss of markets for many producers.
Concerns over a global economic slowdown are real, and there was agreement that the petrochemicals industry is unlikely to emerge unscathed. A lot of what it produces is tied to economic activity – housing starts, automotive purchase, spends on fast moving consumer goods, etc. Indeed, the demand slowdown in China is attributed substantially to contraction in all of the above sectors, which has come on top of significant over-investments in many value chains.
The slowdown has had global consequences – depressing operating rates and squeezing margins – and prompted some rationalisation. As would be expected, the most severely impacted are the high-cost producers, and many are in Asia.
Japan – an ageing society and petrochemicals industry
Japan's petrochemical industry is possibly the most outdated and uncompetitive in the region. The essential structure of the industry, which still operates old, small, and uncompetitive ethylene crackers, has been unchanged, even as stiff competition in international markets (notably China) and falling domestic demand (largely due a declining and aging population) has limited operating rates.
Ethylene operating rates have been below 90% since May 2022, and last year dropped to around 80%. Ethylene production has fallen almost every year since a high of 7.7-mt in 2007, and in 2023 was just 5.3-mt (capacity: 6.2-mtpa) – a level attained as far back as 1989!
A stiff target to attain carbon neutrality by 2050 is adding to the challenges Japan's petrochemicals industry faces.
Thailand – the biggest in ASEAN
Thailand – which has the biggest petrochemical industry in ASEAN with an ethylene capacity of 5.5-mtpa (2024) – is also facing the heat. About two-third of this capacity is based on naphtha, and these plants are in the high end of the ethylene cash cost curve. The balance one-third is based on gas, and relatively better placed. No surprise then that many in the former lot are rethinking feedstock options, including imports of ethane from the US. Several efforts are ongoing to ramp up infrastructure needed to facilitate such imports (tank terminals, pipelines and specialised ocean carriers).
About half of Thailand's petrochemicals output is consumed locally and the balance exported, and China has been a key market. But the latter's quest to raise self-sufficiency has had an impact, and petrochemical volumes shipped from Thailand to China have declined in recent years. The industry is pinning hopes of a recovery on investments from Chinese companies, partly in a bid to escape US tariffs, but much will depend on how US trade policies evolve in coming months.
Petrochemical producers in Thailand are also rejigging portfolios for a greater play in specialities such as low-carbon polymers (e.g., made from bioethanol-derived ethylene), biopolymers (e.g., polylactic acid), and circular polymers. But these are niche materials, and do not mitigate the fundamental weaknesses in the broader petrochemical industry.
South Korea – falling profitability
Historically, South Korea has been a leader in producing ethylene through naphtha cracking and exporting high-value-added processed products. Here too, China's push towards self-sufficiency has significantly impacted South Korean exports, and profitability.
The country's petrochemical giants, including LG Chem, Lotte Chemical, Hanwha Solutions, and Kumho Petrochemical, have seen profits dwindle. In 2022, their combined operating profit totalled $2.98-bn, but this plummeted to $1.6-bn in 2023 and just $163-mn in 2024. Experts agree the crisis is structural rather than cyclical and requires comprehensive institutional reform and financial support from the government. Some promises have been made, but no concrete proposals have been forthcoming,
While Japan is the world's oldest society (with 30% of its population over the age of 65), South Korea presently has half that share, but the fear is that it is going the same way. The contraction in the petrochemical industry in the former may portend what may come to the latter.
Taiwan – regional competition takes a toll
According to data from the Petrochemical Industry Association of Taiwan, the country's ethylene capacity is about 4.0-mtpa, while its propylene capacity is about 3.4-mtpa. In 2024, production of major petrochemicals dropped 2.39%, exports were down by 4.3% and demand fell by 1.1% from the previous year.
And the prospects for 2025 also seem grim. Weak downstream demand and regional competition are expected to keep cracker utilization rates in the range of 60-70% in 2025. Symptomatic of the industry's travails, Formosa Petrochemical, a leading producer, has been operating just one of three crackers, citing poor demand and unhealthy margins.
India – a lone bright star
Amongst all the gloom, India is seen as an exception, with demand expected to continue to grow for the near-term, though possibly slower than hitherto. Growth will be driven by demographics and rising aspirations of the expanding middle class, as well as investments in industrial sectors such as automobiles, infrastructure and construction, among others. The Chemicals and Petrochemical Manufacturers' Association, an industry lobby group, reckons India's petrochemical industry has entered a new phase of growth, manifest in a slew of projects.
The first of these to come online in the next few months will be the refinery and petrochemical complex being set up by HPCL Rajasthan Refinery Ltd. (HRRL), a joint venture between Hindustan Petroleum Corporation Ltd. (HPCL) (74% stake) and the Rajasthan State government (26%), at Barmer. This dual-feed cracker will have the capacity to produce 820-ktpa of ethylene, 400-ktpa of propylene, aromatics (benzene & toluene), and polyolefins. Mechanical completion is expected by September this year, with full operations anticipated by December.
Another project also expected to go online this year is a propane dehydrogenation (PDH) unit being built by gas major, GAIL India Ltd., at Usar (Maharashtra) at a cost of $1.2-bn. This unit will have a nameplate capacity of 500-ktpa for propylene and matching capacity for polypropylene. GAIL has selected US engineering company Lummus Technology and Switzerland-based specialty chemical firm Clariant for catalyst supply. Further down the line is a similar project from Indian Oil Corporation (IOC), India's largest refiner.
Petrochemical projects in India are also recalibrating feedstock choices to include ethane imported from the US. Ethane-based crackers have the lowest cash cost position for ethylene and though importing it does add to costs due the complex logistics, it is still an attractive option. Reliance Industries Ltd. was the first to get on this act and is now one of the largest importers of ethane in the world. And others are set to follow. ONGC, for one, is eyeing import of 800-ktpa of ethane for its dual-feed cracker at Dahej, which is operated by its 95%-owned subsidiary, ONGC Petro-additions Ltd. The cracker currently runs on a mix of naphtha and C2 (ethane), C3 (propane) & C4 (butane) feedstock. ONGC has recently expressed an intent to partner with firms that will operate and manage Very Large Ethane Carriers, Very Large Gas Carriers and Liquefied Natural Gas Carriers. The government – prodded by industry participants – is believed to have offered to slash import duties on US ethane from 2.5% currently to nil. While this is being offered as a sop to partly correct the ~$46-bn trade surplus India has with the US, it will also improve the competitiveness of crackers here that use ethane as feedstock.
While the new petrochemical capacity coming in the short-term is welcome, growing demand will necessitate continued imports, and many more projects are needed. Configuring them for commercially viability in a challenging external environment will require investors to make astute choices when it comes to size, location, level of integration, technology and feedstock, as well as supportive government policies that ensure imports – from the region and beyond – at predatory pricing are kept at bay.
