BLOG: Global oversupply of petrochemicals to hit 218m tonnes in 2023 – the highest in any year since 1990

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

If a slogan is repeated by enough people for enough of the time it can be believed, regardless of the data. We all like to be part of a crowd, a community, because we are social animals.

When people kept talking about the rise of China’s middle class leading to very strong petrochemicals demand growth into the distant future, the theory might have gained critical momentum.

But as we’ve been highlighting since 2014, China’s demand boom was the result of the demographic dividend of a youthful population and the credit bubble.

We have been warning that these “one off’ factors would come an end. They have come to an end, leading to a sharp decline in China’s petrochemicals demand growth – sharper than some analysts expected.

This could help explain the main chart in today’s blog post. It shows that we confront the highest level of global oversupply in the six building block petrochemicals – ethylene, propylene, butadiene, benzene, mixed xylenes (MX) and toluene – since 1990.

Another reason could be that because too many people only looked at cost-per-tonne economics, they assumed that China wouldn’t build lots of the plants it said it would build.

But as we have been also highlighting for nearly 10 years, cost-per-tonne economics are not the only factor behind project approvals in China.

Other reasons include adding value to manufacturing as part of efforts to escape the country’s middle-income trap and supply security.

Whatever the reasons, the data makes one’s hair stand on end:

• Between 2000 and 2022, global capacity exceeding demand in the six building block petrochemicals averaged 76m tonnes – a figure skewed higher by the steep rise in surplus capacity that began in 2019.
• But still, capacity exceeding demand is forecast to surge to 218m tonnes in 2023 from 191m/tonnes last year. The 2023-2025 average is expected to also be 218m tonnes.

What happens next? This will be the subject of future blog posts and ICIS podcasts.

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.