Closing the old, adding the new: will China’s olefin glut ever ease?

China is entering a decisive phase in its petrochemical strategy, with ethylene and propylene expansions through 2030 poised to reshape both domestic and regional markets. While Beijing’s pledge to phase out aging facilities lifted expectations of reform earlier this year, the scale of upcoming additions now raises the risk of a prolonged imbalance in Asian olefins.

Massive build-up continues

ChemOrbis Supply Wizard data show China’s ethylene capacity nearing 60 million tons/year in 2025, projected to reach about 86 million tons/year by 2030. Propylene is on an even larger trajectory, climbing from almost 78 million tons/year to around 96 million tons/year in the same period.

Such relentless growth underlines Beijing’s ambition to dominate the petrochemical chain. Yet, the pace threatens to outstrip demand growth in Asia, leaving olefin margins under pressure for years. Some market participants caution that oversupply in the region could linger well into the next decade, even as investment momentum slows toward the late 2020s.

The aging capacity factor

In July, China’s Ministry of Industry and Information Technology (MIIT) lowered the age threshold for “outdated” facilities from 30 years to 20. Early interpretations suggested large swathes of propylene capacity could be affected, but later reviews put the true share closer to 10%. For ethylene, the impact is similarly limited (around 12%), with only a small fraction of older naphtha crackers expected to fall under the new rule.

This more modest impact means that while closures will occur, they are unlikely to materially offset the flood of new projects. Similar restructuring drives are under way in Japan and South Korea, with steam cracker rationalizations expected before 2028, but the scale remains limited compared with the wave of Chinese investments.

Risks of imbalance

This mismatch between incremental closures and massive additions suggests that low operating rates may persist, dragging on profitability. Even as new plants improve efficiency and lower emissions, their scale could deepen competition in an already saturated olefins market. Some high-cost producers in Asia and Europe will eventually be forced out, but unless closures accelerate dramatically, supply relief will remain gradual.

Adding to the uncertainty is enforcement. Provincial governments in China have historically resisted strict shutdowns due to jobs and tax revenue, raising questions over how firmly MIIT’s rules will be applied.

Competitive light feeds offer some hope but risks persist

The ongoing shift from small naphtha-based units to large integrated complexes using light feedstocks like ethane and propane promises gains in productivity and technology renewal. Propane dehydrogenation, in particular, has emerged as a core pillar of China’s propylene expansion, diversifying feedstock use and boosting flexibility.

Asian operators are also weighing a greater shift toward ethane-based cracking for cost competitiveness, and several new ethane-fed projects are expected before 2030.

Although feedstock diversification and flexibility may soften cost pressures, there are still big risks to take into account. The most critical challenge is the high level of dependency on US imports for Asian operators considering the sustainability of the investment particularly when trade tensions have turned into a war since early 2025. The US remains the top ethane and propane supplier of the world, and China is fully dependent on US ethane while relying on the US for about 60% of its propane needs. Not to mention, there are also “very high” infrastructure and shipping costs that add up to the investment plans for crackers using/switching to light feedstocks.

Game-changer or bubble?

Between now and 2028, China’s ethylene and propylene expansions will dwarf the potential capacity losses from aging unit closures. While this may cement Beijing’s influence across Asia’s olefins trade, the risk is that chronic oversupply keeps margins depressed for another three to four years at least, potentially until the next investment cycle turns after 2028.

The decisive question remains: is China laying the foundation for petrochemical dominance, or inflating an olefins bubble that will weigh down global markets for years to come?