SE Asia’s indefinite PE shutdowns: A market in crisis as demand woes threaten survival

The previous decade’s optimism about sustained demand growth fueled ambitious capacity expansions across Asia’s polyolefin markets. But the landscape has shifted dramatically. Post-pandemic economic bottlenecks, soaring costs, and shifting consumption patterns amid aging populations have upended the industry’s trajectory. Now, a wave of indefinite PE plant shutdowns across Southeast Asia underscores the deepening crisis, as producers battle poor margins, oversupply, and an uncertain future.

As the region grapples with these challenges, questions arise about the impact on price trends and import flows. Will production cuts and supply constraints be enough to stabilize the market, or is this the beginning of a prolonged downturn for Southeast Asia’s petrochemical industry?

A triple blow to the market: High costs, oversupply, and weak demand

Major producers in the region have been forced to suspend operations or reduce run rates for nearly two years due to persistently weak margins amid expensive heavy naphtha feedstock, weak demand, and an oversupplied market. Since Q4 2024, the region has seen even deeper production cuts and prolonged shutdowns.

Housing significant ethylene, propylene, PE, and PP production capacities, Long Son Petrochemicals in Vietnam can indeed be considered brand new after reaching on-spec production in December 2023 and starting commercial production in January 2024. However, it remained shut from February to August due to multiple technical issues. It was around mid-October when the company shut its cracker and downstream units again this time due to profitability issues , with operations expected to remain suspended until 2026. Similarly, Malaysia’s Lotte Chemical Titan and the Philippines’ JG Summit Petrochemicals have announced extended shutdowns of their PE and PP units, citing profitability issues.

JG Summit Holdings Inc., a major player in the Philippines, has placed its petrochemical unit on an indefinite commercial shutdown, a move described as the “best decision” under challenging market conditions. The company will continue to sell from existing inventory but has not provided a timeline for resuming operations.

Asia’s naphtha crackers struggle as ethylene costs soar

Data from C-MACC and ChemOrbis show that Southeast Asia’s ethylene margins from naphtha cracking have remained negative for over a year.

The latest C-MACC data for January 2025 indicate that Asian naphtha-based ethylene production costs are nearly five times higher than those from Saudi and US ethane-based crackers. This persistent cost gap continues to squeeze Asian producers’ margins, limiting their competitiveness in both regional and export markets. With rising feedstock prices and weaker downstream demand, Asian crackers are struggling to maintain high operating rates, potentially leading to more production cuts or shutdowns.

This lack of competitive power with respect to their counterparts in the US and Middle East is the exact reason why SCG’s Long Son Petrochemicals complex is expected to remain shut until 2026 . During the suspension, SCG will focus on a $700 million Ethane Feedstock Enhancement project, set for completion by late 2027. This initiative aims to reduce costs and improve raw material flexibility. The company has also secured a long-term agreement with an affiliate of Enterprise Products Partners to source 1 million tons/year of ethane from the US for 15 years. One could even venture to speculate the Long Son complex may remain shut until the new ethane project is completed if current circumstances persist.

Can production cuts balance supply and demand?

While supply constraints have temporarily supported prices, weak demand and economic uncertainties continue to weigh on the outlook. Planned maintenance shutdowns and production cuts across Asia and the Middle East are expected to tighten supply in Q1 and Q2. However, buyers remain cautious about building inventories due to sluggish downstream activity.

Following the Lunar New Year holiday, Southeast Asia’s import PE markets saw price hikes as sellers responded to reduced supply from both the region and the Middle East. The weekly average price ranges for LDPE and HDPE film climbed to the highest levels since late November, while LLDPE film prices reached their highest since mid-July. Despite this, weak regional demand continues to cast doubt on price sustainability.

“HDPE film supplies are tight, but buyers are only purchasing to meet immediate needs,” noted a Malaysian trader. This cautious approach underscores concerns over whether the price increases can be sustained in a weak-demand environment.

Adding to the uncertainty, the US’s 10% tariff on Chinese goods raises concerns about potential disruptions in trade flows. Since China plays a central role in global petrochemical exports, any disruption could have ripple effects on Southeast Asia’s already struggling market.

ASEAN’s import PE demand stalls

Data from ChemOrbis Stats Wizard Pro reveal that ASEAN’s annual PE imports remained steady at around 4.3-4.4 million tons between 2021 and 2024, following two consecutive years of decline. While import volumes did not drop significantly in the last four years, they also failed to grow, despite competitively priced imports. This stagnation signals that the region’s PE demand has effectively stopped expanding.

Changing supplier panorama

Although import volumes have remained stable, the supplier mix has shifted as buyers have increasingly prioritized the most competitive offers. While Saudi Arabia and the US remain the dominant suppliers, their market shares have fluctuated, allowing other exporters to strengthen their presence.

Saudi Arabia has consistently been ASEAN’s largest PE supplier, but its export volumes have seen a notable decline from 2020 to 2023, before rebounding slightly to 1.8 million tons in 2024. This decline suggests increased competition from emerging suppliers.

Similarly, US exports to ASEAN showed volatility, dropping sharply from 2020 to 2021, before partially recovering to 1.3 mil tons in 2023. However, volumes softened again to 1 mil tons in 2024, potentially due to freight cost challenges.

South Korea, the UAE, Qatar, and Kuwait have expanded their market share in ASEAN’s PE imports, filling supply gaps left by traditional suppliers. South Korea’s exports nearly doubled from 2020 to 2024, driven by growing competitiveness and regional trade partnerships, while the UAE rebounded in 2024, possibly benefiting from Saudi Arabia’s reduced shipments. Qatar and Kuwait also strengthened their positions, reflecting a more active role by Middle Eastern producers. Meanwhile, China’s exports more than doubled from 2020 to 2024, as domestic oversupply pushed more material into ASEAN markets, signaling its growing influence on regional pricing dynamics.

Financial strain on producers

The financial toll on Southeast Asian producers is evident. For FY2024, Malaysia’s Lotte Chemical Titan’s net loss widened to RM1.18 billion ($264 million), compared to RM780.29 million ($175 million) in 2023, while revenue decreased by 2.76% to RM7.44 billion ($1.6 billion). The company anticipates short-term volatility due to geopolitical tensions, fluctuating oil prices, and weak demand amid an oversupply in China. CEO Jang Seon Pyo highlighted operational stability and cost efficiency as the main priorities for the upcoming year.

Thailand’s SCG Chemicals reported a net loss of 7.99 billion baht ($237 million), a reversal from the net profit of 589 million baht ($17 million) in 2023. SCG’s Long Son Petrochemicals complex, which has faced multiple operational challenges since its startup, is expected to remain suspended until 2026 due to unfavorable petrochemical spreads.