Petrochemical Decline Set to Continue

Challenges Facing the Petrochemical Industry

The petrochemical industry is currently facing a period of decline that is expected to last until 2027, after which it may begin to recover. Analysts suggest that this downturn is driven by several factors, including overproduction and shifting global demand patterns.

Laksamon Duangkit, an analyst at PTT Global Chemical Plc, highlighted concerns among petrochemical manufacturers regarding a significant increase in ethylene and propylene production over the past five years. These two chemicals serve as essential building blocks for polymers and are used in a wide range of applications. Ethylene is a key feedstock for solvents and detergents, while propylene is used to produce various chemicals, including isopropyl alcohol, which has applications in cleaning and medical fields.

Global production capacity for ethylene and propylene is currently around 160 million tonnes per year. However, the volume of these chemicals is projected to continue increasing by 30-40 million tonnes annually. This growing supply could lead to a market imbalance, making it difficult for manufacturers to maintain profitability.

According to Laksamon, the market is expected to improve in the second half of 2027 due to stricter environmental policies in many countries. These policies may help slow down production, allowing the market to stabilize.

China plays a crucial role in the global oversupply of petrochemical products. The Federation of Thai Industries' Plastic Industry Club noted that the economic slowdown in China reduced local demand for these products, prompting manufacturers to export their goods overseas. As a result, China has become a major exporter of petrochemical products, targeting Asian markets such as Thailand.

In addition to China, the US and the Middle East are also significant players in the petrochemical export market. Laksamon emphasized that competition among producers is likely to intensify, leading to increased price competition. Dechathorn Thisitsakorn, a marketing strategy and data science analyst at IRPC Plc, pointed out that imported petrochemical products now account for one-third of the products available in the Thai market.

Petrochemical companies are not only competing to attract customers but also for access to transport facilities. Previously, manufacturers delayed shipping their products to the US, waiting for clarity on reciprocal tariffs. Once import duty rates were finalized, they began exporting their products to the US, resulting in congestion in the logistics system and higher shipping costs.

This situation highlights the complex challenges facing the petrochemical industry. Overproduction, shifting trade dynamics, and environmental regulations are all contributing to a highly competitive market. As the industry navigates these challenges, it will need to adapt its strategies to remain viable in the long term.