Quantifying the steam cracker closure threat

Authors: Olivia Steele (Principal Analyst), Kelly Cui (Principal Analyst), Frida Cheng (Research Associate), Catherine Tan (Director - Research), Alan Gelder (Senior Vice President - Research), Shruthi Thirupakuzi Vangipuram (Senior Research Analyst), Rahul Rawat (Research Associate)

The global ethylene industry faces a prolonged downcycle. Oversupply and margin pressures, stemming from China's capacity overbuild and weak demand drive these challenges. Conflicts in Ukraine and Gaza compound the situation, alongside uncertainty from US trade tariffs. The global downturn started in 2020 and is likely to persist until 2029. This extended period threatens the closure of numerous ethylene assets globally, with units in Asia and Europe at greatest risk. 

Almost 4 million tonnes of global ethylene closures have been announced since May 2024 and we expect more capacity to face the risk of closure through the end of this decade.  

Using Wood Mackenzie’s Ethylene Asset Benchmarking Tool, we compared ethylene production margins in 2025 and 2030 and grouped the assets into three risk levels based on margin position. We also considered other factors, such as the strategic importance of the assets and the host country's regulations and policies. Fill in the form to receive a complimentary extract from our Global Steam Cracker Closure Threat Update 2025 and read on for a brief introduction. 

A record operating low 

Global ethylene operating rates hit 84% in 2025, a significant drop from more than 90% prior to 2019. This trend is likely to persist, in our view, with rates staying in the 84-88% range for the remainder of this decade unless there is significant capacity rationalisation. Up to 5 million tonnes of ethylene capacity in Europe and 11 million tonnes in China could be phased out over the next five years. 

China’s investments this decade has drastically altered the global ethylene supply landscape, resulting in a structural surplus, particularly in Asia, and persistent low or negative profit margins. The return on investment (ROI) for ethylene-high-density polyethylene (HDPE) integrated plants in China is set to hit a record low of -11% in 2026, entering positive territory only after 2032.  

Europe, meanwhile, is experiencing rising energy prices and subdued demand, resulting in heightened rationalisation pressures and stalling investments. Cheaper imports and the drive for decarbonisation add further pressure.  

China behind heightened closure risk in Asia 

In this year’s update, we shortlisted 113 out of 336 screened assets as having some level of closure risk. This represents 27% (approximately 63 Mtpa) of global ethylene capacity projected for 2025, with over half of these assets falling into the high- and medium-risk categories. Notably, announced closures are classified under the ‘high risk’ category. Asia and Europe are the most affected regions.

Under China’s energy-saving and carbon-reduction regulation and the recently launched anti-involution policy, aged and inefficient crackers across the country will be phased out and replaced with more cost-competitive and energy-efficient ones. Around 11 million tons of ethylene faces some kind of closure risk through 2030. The total risked capacity in 2025-30 will account for 19% of total 2025 China capacity. 

China is in the process of launching an in-depth reform of the petrochemical and refining industry. This plan is currently awaiting final approval by the Ministry of Industry and Information Technology. We expect China to tighten approval for new petrochemical projects and further develop value-added materials in the country’s forthcoming 15th Five-Year Plan for 2026-30. 

China’s overbuild has pressured its traditional trading partners, such as South Korea and Japan, to engage in rationalisation too, with persistent losses prompting producers to shut down plants or consolidate assets. Japan, South Korea and Taiwan will have about 12Mt of capacity at risk. About 7.2Mt of cracker capacity is at risk across South and Southeast Asia. 

US tariff deal could spell further gloom for Europe

In Europe, announced closures will shrink capacity by 12% to 2028 (compared with 2024), with a further 13% of total capacity up for sale. Another 3.9 million tons of ethylene capacity are assessed as being high risk, with just over three-quarters of these units located in Western Europe. Although margins remain a key consideration for rationalisation risk, players across the cost curve are looking to downsize their European portfolios as weak demand persists.  

Net exporter countries such as the US, North Africa and the Middle East are likely to continue flowing material into Europe long term. The latest trade deal between the US and EU has yet to specify which products will fall under the zero tariff, however. This could spell further gloom for the European market if ethylene and polyethylene are included.  

To learn more, fill in the form for a complimentary extract from our report.