Ethylene, propylene capacity growth outpaces demand
Glut threatens Asian, European rivals
China39;s producers suffer losses in market share battle

June 26 Reuters China is relentlessly adding new petrochemical capacity despite a global glut as the country39;s refiners diversify from transport fuels, threatening to depress margins worldwide through 2024 as weak economic growth saps demand.

In an ominous sign for producers of the chemicals used in plastic packaging, polyester clothing and auto parts, refiners39; profit margins on processing naphtha to make ethylene turned negative last week for the first time since October.

The profit crunch is being driven by China39;s refiners boosting output of olefins such as ethylene to offset an expected decline in sales of petrol and diesel as electric vehicle takeup accelerates. Their capacity expansion is outpacing growth in demand for the chemicals.

Global demand for ethylene and propylene is forecast to surge 29 from 2023 to 426.8 million metric tons by 2030, while capacity is expected to jump 25 from 2023 to 485.9 million metric tons by 2030, research firm Wood Mackenzie WoodMac estimates.

New capacity in China is expected to make up more than half of that growth, according to the International Energy Agency.

In 2023, WoodMac sees China39;s output growth creating a local surplus of 4.24 million metric tons of ethylene and an even bigger oversupply of propylene at 8.69 million metric tons.

The surplus of olefins will…