Petrochemicals and Polymers: Quarter one performance

Asia Pacific

The Asia Pacific petrochemical market in the first quarter of 2025 remained under pressure as weak demand, oversupply, and margin compression persisted across most value chains.  While crude oil prices exhibited short-term volatility, overall levels remained stable, providing limited cost relief for upstream petrochemical feedstocks.  Despite some demand improvements in China following the Lunar New Year, structural imbalances in key product segments continued to constrain profitability. 

Brent crude oil prices fluctuated between US$74 and US$81 per barrel, influenced by geopolitical tensions, U.S. sanctions on Russia, Iran, and Venezuela, and supply-side adjustments from OPEC+.  However, concerns over weakening macroeconomic indicators in China and global demand ultimately prevented any sustained upward price movement.  Refinery margins remained weak as subdued petrochemical feedstock demand limited the cost benefits of easing crude prices. 

Ethylene and propylene markets faced continued margin deterioration, particularly for naphtha-based crackers, as weakening co-product values and competitively priced exports from the United States weighed on producer economics.  Propane dehydrogenation (PDH) operators faced additional pressure from elevated propane costs and weak polypropylene demand, further restricting production economics.  In Southeast Asia, several producers, including those in Malaysia, Vietnam, and the Philippines, maintained low operating rates or extended plant shutdowns to manage supply imbalances. 

Polyolefin markets remained weak, with high inventories and slack demand across Asia.  Despite some reductions in operating rates and planned plant turnarounds, new domestic capacity in China continued to weigh on prices and margins.  While some tightening in ethylene and propylene availability provided support, overall market sentiment remained cautious, with buyers reluctant to commit to large purchases. 

Aromatics markets struggled with mounting oversupply challenges, exacerbated by increased imports into China and limited arbitrage opportunities to the United States.  Benzene and mixed xylenes remained under pressure, while paraxylene margins contracted due to weak gasoline values and continued sluggishness in polyester intermediates, forcing some capacity rationalization. 

The polyester and intermediates segment continued to face significant challenges, particularly in the monoethylene glycol (MEG) market, where an influx of low-cost, coal-based supply in China pushed margins further below breakeven.  The purified terephthalic acid (PTA) and polyethylene terephthalate (PET) markets saw little recovery, as oversupply conditions persisted, keeping profitability at record lows. 

Despite some seasonal demand recovery, the petrochemical sector continues to grapple with structural oversupply, weak downstream margins, and broader economic headwinds.  Producers remain focused on cost-cutting measures, asset rationalization, and inventory management to mitigate further financial pressures.  Without a meaningful resurgence in demand, pricing power is expected to remain weak, keeping the industry in an intensely competitive and margin-constrained environment in the near term. 

United States 

Widespread disruption to production pinched petrochemical markets in the United States tight opening 2025.  Allocation of stocks to cover scheduled maintenance turnarounds in January left little slack in supply chains as periodic adverse weather halted numerous plants and interrupted distribution.  Markets abruptly turned down as supply normalized through February and a contrasting view of weakening demand shaped markets.  Firming consumer sentiment built alongside reduction of interest rates through the second half of 2024 soured as extensive tariffs implemented by the incoming Administration shocked financial markets.  Cautious purchasing moderated demand as the turbulent economic climate was assessed. A steep increase of gas prices alongside seasonal heating demand escalated cost of processing NGL feedstock. Ethane prices increased 20 percent from the closing quarter of 2024 and propane prices were up 16 percent.  Weakening markets impeded pass through of consistent cost pressure as uncertain demand capped petrochemical prices.  Stagnant prices in consistently lengthy Asian markets set the direction for price settlements to ensure competitiveness of export business.  The NexantECA petrochemical and polymer profitability index dropped to test historic lows  for a second consecutive quarter. 

Ethylene markets in the United States tightened as severe winter weather and scheduled maintenance turnarounds shortened supply into January.  Slack demand was exposed as crackers returned to operation in February.  Consumption into derivatives was blighted as confidence in the economic climate stalled across the changing administration.  Acute supply shortage propelled ethylene prices to a sharp peak in January.  Export activity briefly paused, after relatively high loadings from the Houston terminal in January. Ethylene costs escalated 20 percent from the closing quarter of 2024 as gas prices faced steeper increase.  Margins fell sharply as markets relaxed in February and ethylene prices retreated ahead of ethane costs.  Periods of tight supply early in the year countered persistent cost pressure and average profitability of ethane crackers recovered losses surrendered in closing quarter of 2024 to test a three year high.  

Propylene markets in the United States tightened alongside widespread weather related supply outages in January.  An unplanned outage at the 750 000 ton per year Enterprise PDH-1 plant at Mont Belvieu significantly reduced availability in spot markets.  Refinery outages and firming alkylation values tightened supply of refinery propylene.  Weakening sentiment on demand side failed to alleviate supply side pressures.  Firming upstream costs elevated production costs at propane dehydrogenation units and refinery sources to their highest for more than a year.  Polymer grade contract prices rebounded US$200 per ton from a floor found in December to settle near US$1060 per ton in February.  The upturn in prices was primarily supply led and prices continued to increase as cost pressure relaxed in February.  Margin surrendered through closing quarter of 2024 was promptly recovered in the opening months of 2025.   

Butadiene demand in the United States remained weak as concerns over impact of more widespread tariffs soured sentiment in the economic climate.  Supply resisted tightness plaguing ethylene and propylene markets and excess volume was exported to Asia.  Fears of punitive tariffs on imports of mixed C4 and butadiene promoted restocking in January.  The brief upturn in demand did little to revive prices which had tumbled almost $100 per ton through the closing quarter of 2024.  Markets continued to be defined by fragile demand, giving little opportunity for price initiatives to revive thin margins.  Modest price gains totalling US$30 per ton across January and February settlements were largely sanctioned by firming prices in Asia and Europe.  Firming upstream costs depressed margins for butadiene extraction to historic lows but healthy derivative margins covered a lack of economic rationale for incremental butadiene extraction.   

Western Europe 

The operating environment for commodity petrochemical industry in Western Europe remained bleak opening 2025.  Stubbornly slack demand was further compromised as confidence in the economic climate stuttered and prospects for recovery rolled back.  Broadening plans for capacity closure are yet to alleviate excess supply and revive operating rates.  The feedstock cost burden mounted as naphtha strengthened relative to firming crude oil prices.  The NexantECA petrochemical profitability index eased towards historic lows as the modest upturn achieved through the first half of 2024 stalled.  

Demand for commodity petrochemicals in Western Europe was blighted by stubbornly weak economic activity into the opening months of 2025.  GDP growth of Euro zone settled below one percent for a second consecutive year in 2024 and risk of renewed trade barriers following the new administration in the United States dampened prospects for prompt recovery.  Manufacturing activity was particularly vulnerable and cautious purchasing backed up supply chains into petrochemicals.  Firming upstream costs in January failed to revive demand despite strict year end stock management depleting inventories to historic lows.   

Supply was mostly aligned with slack demand as producers were reluctant to relax a stringent focus on stock management evident in the closing months of 2024.  Firming freight costs and disruption to production in wider global markets capped availability of import cargoes.  Pockets of market tightness periodically cited by producers were attributed to excessively stringent supply side management as buyers referenced low operating rates.  Stubbornly lengthy domestic supply risked further capacity rationalisation.  Dow mothballed a 600 thousand ton per year cracker at Ternuzen as maintenance investment was deferred. 

Brent crude oil prices firmed US$2/bbl from closing quarter of 2024 to average US$77.7/bbl through January and February but renewed volatility offered an uncertain cost base for the petrochemical industry.  Oil prices escalated sharply into January as adverse winter weather disrupted supply in the United States and the outgoing administration tightened sanctions on Russia.  Abrupt changes in policy by the incoming administration stalled early year optimism in markets and oil prices tumbled alongside a downturn in financial markets.  Cost of petrochemical feedstocks sourced from the refinery followed turbulent crude oil prices, with a peak in January promptly reversed in February.  Lengthening supplies of propane offered cost advantage despite gas prices strengthening relative to crude oil. 

Ethylene markets in Western Europe remain blighted by persistently slack demand opening 2025 despite a broadening focus on rationalisation of surplus capacity.  Escalation of upstream costs early in the year compounded market pressures as production costs rebounded unexpectedly after settlement of January contracts at a role over.  Fears of deteriorating global trade relations depressed market sentiment and impeded recovery of margin as costs stabilised in February.  Margins of the naphtha cracker dropped to a three year low as production costs posted a two year high.  

Adverse economic sentiment prolonged weak demand for propylene as many consumers were reluctant to reveres stringent reduction of stocks closing 2024.  Widespread talk of capacity rationalisation is yet to abate lengthy supply.  A sharp increase in naphtha costs secured largest increase in propylene prices for 15 months as February contract prices increased €52.7.  Profitability of on-purpose supply from propane dehydrogenation units resisted cost and market pressures as propane prices offered cost advantage relative to naphtha unusually early in the year. 

Slack butadiene demand on extended downturn in automotive sector aligned with short C4 supply as steam cracker operating rates were trimmed to reflect weak demand plaguing broader petrochemical industry.  Contract prices lacked direction from cost or market influences as they settled ahead of the new year and rolled over into January.  Escalating upstream costs plunged margins towards cash cost breakeven. February contract prices promptly adsorbed the higher cost base and margins rebounded to realign with average achieved in weak markets through second half of 2024. 

Polymer demand in Western Europe was slow to return to seasonal norms in January as adverse sentiment in economic climate retained cautious purchasing and some convertors extended seasonal closures.  Monomer availability continued to constrain resin supplies alongside low cracker operating rates.  Planned cracker closures continue to be heard ahead of rationalization of polymer capacity.  Delayed import cargoes from the United States further impeded supply.  Brisk escalation of naphtha costs into January alongside firming markets enabled fresh price initiatives opening 2025.  The higher price point failed to revive profitability and margins of integrated polyolefin units continued to test historic lows. 

Prolonged fragile demand depressed benzene contract prices 30 percent over nine consecutive months into the January settlement at €855 per ton.  Firming gasoline values into 2025 countered extended market pressures and led benzene prices to find a floor.  The extended downturn of benzene prices in Western Europe set the floor to global prices.  Firming gasoline values offered little economic incentive for toluene conversion.  Margins for integrated aromatics complexes settled at a three year low as reformer margins steadied and countered stubborn weakness in petrochemical markets. 

Recent closure of PET plants in Western Europe offered little relief to markets as the slow season for demand into the bottle sector prevailed through the winter.  Closure of the 420 000 tons per year Indorama plant in the Netherlands removed more than 15 percent of virgin bottle grade capacity but the lengthy supply/demand balance was little changed opening 2025.  Poor demand depressed prices against firming feedstocks costs as naphtha prices escalated into January.  Profitability surrendered modest gains earned as upstream costs relaxed to floor by the end of 2024.  Margins reverted towards previous floors approaching variable cost breakeven opening 2025. 

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Quarterly Business Analysis: Petrochemicals, Polymers and C1 Chemicals - Q1 2025

The Quarterly Business Analysis provides key insight into production economics for a broad range of commodity petrochemicals, polymers and C1 chemicals.  The analysis presents a review of costs, prices and margins for typical production assets, providing a valuable view of regional and value chain competitiveness and is is available for each key price setting region - Asia Pacific, Middle East, Western Europe and the United States.  A quarterly report provides insightful commentary to illustrate current trends, related to recent market developments.  The accompanying database is updated monthly.

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