Petrochemicals and polymers: Quarter three performance

Asia Pacific

The Asia Pacific petrochemical industry continued to face significant margin pressure throughout Q3 2025, with most products operating at or below cash cost breakeven.  Persistent oversupply from capacity additions, particularly in China, outpaced demand growth across most value chains.  US-China trade tensions and proposed tariffs disrupted established trade flows, while expectations of OPEC+ production increases prompted inventory destocking.  Market sentiment remained cautious with producers prioritizing cash preservation over margin optimization. 

Ethylene margins in China remained stable while South-East Asian producers faced negative cash margins. Chinese propylene PDH margins turned positive at cash cost level, though South-East Asian integrated operations remained underwater.  Butadiene extraction margins eased but remained one of the few profitable segments in the region.  Integrated naphtha crackers saw negative margins for HDPE and LLDPE, while LDPE maintained modest positive margins.  Several major capacity additions came online, including Yulong's naphtha cracker and multiple polypropylene plants across Southeast Asia, exacerbating oversupply.  Converters maintained a cautious stance amid weak finished-goods orders and tariff uncertainties. 

Benzene markets were flooded as China's imports increased dramatically year-on-year, with South Korea redirecting the vast majority of its exports to China after the US-Korea arbitrary window closed.  Paraxylene spreads improved, though margins for non-integrated producers remained negative.  Downstream derivatives like caprolactam faced heavy losses as prices tracked costs downward.  Styrene prices stabilized in Southeast Asia with improving margins, while China saw declining margins. Polystyrene production fluctuated throughout the quarter. ABS margins narrowed as automotive, and electronics sectors showed mixed performance amid tariff concerns.  SBR demand remained weak, particularly affecting exports of tires and consumer goods. 

MEG producers narrowed losses slightly though integrated margins worsened.  PTA and PET margins fell below variable cost breakeven in most operations.  China's exports continued to grow despite weak domestic demand, with producers systematically reducing inventories in anticipation of lower prices. 

Propylene derivatives faced significant challenges across the board.  Acrylonitrile margins dropped to near breakeven as oversupply pressures mounted from new capacity additions while downstream demand weakened.  Phenol markets deteriorated significantly with prices falling substantially as BPA exports lost market share internationally, causing China to temporarily return to net importer status in July-August. Regional operating rates remained depressed with multiple production cutbacks and turnarounds.  MDI demand remained subdued with prices declining as construction activity fell significantly.  TDI pricing strengthened due to supply constraints from maintenance outages, providing a rare bright spot in the industry.  MDI margins deteriorated while TDI margins improved but remained near historic lows. 

United States 

Petrochemical markets in the United States firmed as demand returned following adverse market reaction to abrupt changes in trade policy proposed in quarter two.  Crucial export business resumed as a more transparent view of tariff schedules instilled confidence.  Widening seasonal cost advantage in NGL feedstocks depressed cost of ethane crackers in the United States towards the cost of ethane crackers in Saudia Arabia that typically define the floor to global production costs. The stable price point for crude oil in global markets allowed domestic producers to delay pass through of cost savings and bolster profitability.  The NexantECA petrochemical and polymer profitability index stagnated and settled at historic lows for a fourth consecutive quarter.  

Ethylene markets in the United States strengthened into quarter three as brisk renegotiation of many regional trade agreements promoted export business.  Risk of punitive tariffs briefly curtailed appetite for crucial derivative exports in quarter two as abrupt changes to trade policy were proposed. Ethylene consumption into derivatives resisted stagnant domestic demand as prompt restoration of presence in keenly contested export markets was seen as a priority.  Supply tightened against firming demand as adverse weather prompted production outages at several crackers.  Ethane cracker margins widened in July as pockets of tightness emerged and held and lent support to contract price settlements.   

Propylene markets in the United States strengthened as relatively strong margins promoted consumption into derivatives.  Domestic demand firmed as consumer confidence picked up following the shock of turbulent trade policy proposed in quarter two.  Easing propane costs widened cost advantage of propane dehydrogenation units as economics for refinery sourced propylene were challenged by higher alkylation values through the summer driving season.  Supply lengthened alongside firming demand and elevated production rates through the summer propelled propylene inventories in the United States to a three year high.  High inventories countered cost advantage in propane and margins at dehydrogenation units remained broadly steady. 

Extremely weak domestic demand continued to afflict butadiene markets in the United States and the prompt recovery achieved in ethylene and propylene markets in quarter two was deflected.  Closure of a chloroprene unit reinforced frail nature of domestic consumption.  Scheduled maintenance turnarounds at butadiene extraction units briefly countered slack demand.  Adverse demand held butadiene prices in the United States at a discount to those in Asia and Europe after prices dropped almost US$60 per ton across July and August settlements.  Butadiene extraction margins were compressed as raffinate-1 coproduct revenue rested seasonal strength in gasoline blending.  Having been historically short on crude C₄s since shale gas exploitation led the transition to lighter cracker feedstocks, some producers were understood to be co-cracking crude C4s in quarter three.   

Western Europe 

Petrochemical markets in Western Europe weakened as brisk renegotiation of trading relations restored availability of import cargoes but the peak summer holiday season offered little relief to domestic demand.  Upstream costs remained broadly steady as crude oil prices settled at a floor close to US$70/bbl.  LPG offered seasonal cost advantage as gas prices relaxed relative to resilient gasoline values.  Integrated producers concentrated margin upstream and resilient profitability at the cracker masked heavy losses where olefins were transferred to derivatives at contract price.  The NexantECA petrochemical profitability index dropped 25 percent from two year high posted in quarter two to realign with average achieved over last three years. 

The deteriorating economic climate heavily capped demand for petrochemicals in Western Europe alongside cautious operations of downstream manufacturing.  A brief move in consumer preference towards domestic supply to seek haven from opaque tariff liability reversed as brisk renegotiation of trade agreements restored trader confidence and import cargoes arrived in larger quantities through quarter three.  Stock building provided modest support to demand as upstream costs found a floor at a four year low.  Plans to close more than two million tons of ethylene capacity in Western Europe confirmed in the first half of the year offered little prompt relief to consistently lengthy markets.  

Crude oil prices stabilised into the second half of the year as downside risk of a more rapid unwinding of OPEC+ supply constraints countered continued upside risk associated with geo-political tensions.  Brent crude settled in a relatively narrow range through July and August and average prices at US$70/bbl firmed just US$1/bbl on quarter two.  Cost of petrochemical feedstocks sourced from the refinery broadly tracked stable price point for crude oil.  LPG offered a modest seasonal cost advantage over naphtha.  Tight supply in Europe promoted diesel cracks and elevated refining margins alongside firm seasonal demand through the driving season in United States and Europe. 

European ethylene markets weakened as brisk renegotiation of trade agreements with the United Staes restored confidence to regional trade and delayed import cargoes arrived just as seasonal demand faded. Recent announcements of capacity closures gave little prompt relief to acutely lengthy supply.  Production costs remained broadly steady as naphtha costs remained closely aligned floor found by crude oil prices into the second half of the year.  Seasonal cost advantage in LPG offered lowest cost source of ethylene.  Resilient margins of crackers selling into contract markets continue to mask broader weakness in derivative markets where frail margins largely deplete integrated margins concentrated at the cracker. 

Widening availability of derivative import cargoes compounded weakness in European propylene markets as low convertor orders throttled consumption into polymer sector through the summer holiday season.  Stable propylene contract prices closely followed ethylene settlements in similarly lengthy markets.  Profitability of on-purpose production at propane dehydrogenation resisted profound market pressures and margins strengthened US$20 per ton to post a two year high above US$500 per ton.  Margin concentrated upstream was mostly surrendered to frail derivative margins. 

Regularly fragile domestic demand prolonged weakness in European butadiene markets as renewed expansion of capacity in Asia risked export opportunities.  Production costs held steady as price of mixed C₄ feedstock and raffinate-1 co-product streams closely tracked inertia in naphtha values.  Downturn in Asian prices through the first half of the year depressed European contract prices for five consecutive months into August.  Profitability was depressed towards average achieved in previous three years as cash margins dropped US$100 per ton from quarter two. 

Derivative plants in Western Europe trimmed production rates as import flows returned from the United States and Middle East.  Exemption from proposed higher tariffs gave confidence to traders to place cargoes into Europe, ensuring imports stayed competitive.  Derivative margins remained depressed towards the floor suffered over the last three years as integrated producers concentred margins upstream at the cracker. 

Middle East 

Petrochemical markets in the Middel East remained vulnerable to excessive length afflicting global petrochemical markets.  A fragile global economic climate continued to impede demand for export cargoes Offers for FOB cargoes were heavily capped to secure acceptance by reluctant buyers as surplus global supplies retained stiff competition.  Cost advantage of feedstocks granted through long term supply agreements with steady nominal rates or defined discounts narrowed as crude oil price found a floor at a four year low.  Profitability of ethane crackers fell to a four year low as production costs converged with the cost base in the United States. 

Ethylene markets in the Middel East remained vulnerable to adverse global economic as principal export markets suffered slack demand.  Excess supply in global markets left export cargoes facing stiff competition to secure limited opportunities.  Subdued appetite for export cargoes of derivatives capped ethylene consumption into derivatives.  Cost advantage of ethylene production the Middle East narrowed as oil prices tested a four year low.  Moderation of ethane costs in the United States offered a similar cost base, leaving logistics cost as the primary source of competitive advantage.  Profitability of ethane crackers slipped to a four year low as cash margins dropped below US$500 per ton. 

Propylene markets in the Middle East remained fragile as slack consumption into polypropylene throttled derivative demand for propylene.  A much smaller domestic sector struggled to adsorb surplus as convertors held ample inventory returning from Eid.  Propylene production costs in the Middle East are shaped by cost of propane feedstock offered to dehydrogenation units in Saudi Arabia at a twenty percent discount to competing export cargoes placed in Japan.  Subdued petrochemical demand coupled with moderating risk of trade barriers on U.S exports of LPG depressed propane prices 14 percent through July and August to settle at a two year low.  Profitability of propane dehydrogenation units firmed to their highest for a year as steady naphtha costs retained value of propylene contained in polymer exports to Asia. 

Find out more...

Quarterly Business Analysis: Global - Petrochemicals, Polymers and C1 Chemicals – Q3 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, recently added 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.

About Us - FGE NexantECA is the leading advisor to the energy, refining, and chemical industries. Our clientele ranges from major oil and chemical companies, governments, investors, and financial institutions to regulators, development agencies, and law firms.  Using a combination of business and technical expertise, with deep and broad understanding of markets, technologies, and economics, FGE NexantECA provides solutions that our clients have relied upon for over 50 years.