BLOG: Why This Year’s NPC Meeting Seems Unlikely to Rescue Chemicals Spreads and Margins

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson.

As China’s National People’s Congress (NPC) wraps up on 11 March, the big question remains: Will policy announcements change the grim reality shown in the two charts below?

• Since the Evergrande Turning Point in August 2021, we’ve witnessed an unprecedented chemicals and polymers downturn—one that could stretch for another decade.
• The Chemicals Supercycle (1993-2021) drove demand thanks to favorable demographics, globalization, and the real estate boom. During this period, CFR China PE spreads over CFR Japan naphtha costs averaged $532/tonne.
• But from 2022-2025, spreads have slumped to an average of $296/tonne, the longest and deepest decline in history. To return to Supercycle levels:
  • HDPE injection spreads would need to jump 133%
  • LDPE spreads would need a 43% boost
  • LLDPE spreads would have to rise 91%

Yet, despite hopes for recovery, spreads have remained at rock bottom since early 2022.

Margins in Freefall: A Historic Collapse

• Northeast Asian PE margins tell the same story. From January 2014 to December 2022, they averaged $461/tonne. But since early 2022? Just $8/tonne, with frequent weeks of negative margins.
• This isn’t just about cyclical demand. The pandemic wasn’t bad for petrochemicals—stimulus-driven demand and supply chain disruptions actually boosted margins.
• The real turning point came in 2021, when Evergrande’s collapse signaled the end of China’s real estate bubble. Chemical demand forecasts have since been slashed from 6-8% growth to a more realistic 1-4%.

Will the NPC Meeting Change the Game?

Premier Li Qiang’s 5% GDP growth target for 2025 raises big questions. With mounting U.S. tariffs (now 20-45% on key goods) and domestic economic challenges, is this goal even achievable?

China’s government has rolled out new strategies:

• Increased fiscal spending – boosting the deficit target to 4% of GDP
• Stimulus for domestic demand – treasury bonds, consumer subsidies
• Tech self-sufficiency – AI, supply chain investments

But will these be enough? Unlikely. The major obstacles remain:

• Trade tensions – Export-driven growth faces U.S. and global trade barriers
• Debt crisis – Local government debt limits room for aggressive stimulus
• Demographic headwinds – Aging population and declining birth rates

The Harsh Reality: Supply Must Shrink

The numbers don’t lie. No policy shift will bring back the Chemicals Supercycle. Without massive global capacity cuts, spreads and margins will remain depressed.

That means shutdowns—likely in South Korea, Europe, and Southeast Asia, where plants are less competitive.

Unless we see unprecedented reductions in production, this downturn will drag on for years.

Depressing? Yes. But ignoring reality won’t help. The chemicals industry must adapt—or face an extended period of financial pain.

Editor’s note: This blog post is an opinion piece. The views expressed are those of the author, and do not necessarily represent those of ICIS.