APIC ’25: INSIGHT: Asia petrochemical industry must embrace changes amid slow demand

BANGKOK (ICIS)–Tough times lie ahead for the Asia’s petrochemical industry amid continued oversupply and a global economic downturn because of US tariffs, but a pivot to sustainable products can help.

• US-China trade war threatens industries
• Oversupply, weak demand signal prolonged downturn; plant closures loom
• Energy transition offers feedstock opportunities

Global megatrends, including geopolitics, energy transition, and sustainability are fundamentally reshaping petrochemical demand patterns and the entire industry.

The US-China trade war de-escalated this week as both sides agreed to bring down tariffs on each other significantly by 14 May.

An all-out trade war between the US and China, the world’s two-biggest economies, could trigger a global recession.

There is also a possibility that amid high trade tensions with the US, China could flood the global market with excess products, which may prompt building of trade barriers by other countries

After striking an initial agreement to bring down tariffs from more than 100%, the US and China are expected to continue with trade negotiations.

In the meantime, uncertainty is dominating markets, leading to soft demand.

DIFFICULTIES
The petrochemical industry is facing significant challenges, including oversupply, cost volatility, and regulatory shifts, ICIS Chemical Analytics vice president Alexander Lidback said.

Amid persistently low demand, firms are shutting plants around the world, notably in Europe, and without significant shutdowns, polyolefin oversupply could persist into the mid-2030s, forcing companies into survival mode.

The industry will need to “go through worse to get better”, with 2027/2028 being a potential turning point for survival, Lidback said.

China’s increased capacity, which was “underestimated”, is also a contributing factor to oversupply, and global polyolefins capacity significantly exceeds demand currently, ICIS senior consultant John Richardson said.

Adaptation through plastics circularity and innovation could be a way for companies to survive, although this also presents its own difficulties, said Bala Ramani, director of sustainability consulting and Asia strategy advisor at ICIS.

All three will be speaking at the Asia Petrochemical Industry Conference (APIC) in Bangkok, Thailand on 15-16 May, discussing market challenges and opportunities in the sector.

The theme for APIC 2025 is “Ensuring a Transformed World Prosperity”, with a particular focus on “Action for Planet with Innovation and Collaboration”.

CIRCULARITY
There is a need amid the current demand downturn to adapt to the changing landscape -one of which is by exploring plastics circularity and alternative feedstocks.

Sustainable polyolefins present as “interesting opportunity”, especially for integrated polyolefins producers to leverage existing assets for driving incremental value, Ramani said.

“By embracing a multi-faceted production model, the polyolefins industry can reduce its environmental footprint, meet evolving regulatory demands, and unlock new value streams in a resource-constrained world,” said Ramani.

The path towards circularity sustainability for polyolefins involves several approaches: mechanical recycling, circular polyolefins derived from pyrolysis oil, and bio-circular polyolefins derived from bio-naphtha or other hydrogenated bio-derived oil.

Pyrolysis is expected to become a complementary solution alongside mechanical recycling in tackling plastic pollution.

In turn, polyolefins producers can maximize the value of pyrolysis oil integration by strategically aligning feedstock procurement, technology, and processing configurations, Ramani said.

Europe leads with robust regulations and collaboration, eyeing over 13 million tonnes of sustainable polyolefins by 2040. Asia, however, lags, stymied by fragmented policies despite interest for sustainable polyolefins from markets such as India, Japan and South Korea.

“In Asia, early adoption by a few markets and global brands, combined with evolving yet fragmented policies, is building momentum and opportunities, with future growth hinging on regulatory alignment and infrastructure development,” Ramani said.

Regulatory fragmentation among Asian countries compared with EU regulatory mandates makes sustainable polyolefins market tricky to scale.

South Korea and Japan are paving the way for sustainable polyolefins demand, although Asian investments are likely to target developed markets such as the EU, before pivoting to local and regional markets in the long term.

Were EU recycled content targets to be adopted in Asia, the region could unlock over 18 million tonnes of sustainable polyolefins demand by 2040.

But while alternative feedstocks and sustainable polyolefins offer opportunities for producers, their widespread adoption faces other hurdles including regulatory uncertainty, high costs, technology scalability and insufficient waste infrastructure.

“Amid ongoing industry challenges, sustainable polyolefins are set to drive resilience through resource efficiency, regulatory compliance, and new value creation enabled by circular production models,” Ramani said.

Insight article by Jonathan Yee

Click here to view the ICIS Recycled Plastics Focus topic page. 

Visit the ICIS Topic Page: US tariffs, policy – impact on chemicals and energy.

Thumbnail image: Panorama from Golden Mount, skyline of Bangkok, Thailand, (By Walter G Allgöwer/imageBROKER/Shutterstock)