Zhongjin: Pay attention to the direction of domestic and foreign policies, ethylene is expected to reach a turning point after 2027.

Zhongjin released a research report stating that currently, China's ethylene industry is still in an expansion phase, while overseas production capacity is facing accelerated exits. According to the global capacity deployment plan, it is predicted that ethylene may reach a turning point after 2027. If domestic and international policies can strictly control the total amount of ethylene, control the deployment structure of various routes, and restructure old capacity, it may stimulate the acceleration of the industry's turning point. Key points from Zhongjin: China's ethylene industry is still expanding, with nearly 25 million tons of planned projects in the next three years. In recent years, China's ethylene production capacity has been rapidly expanding, but by 2024, there will still be a shortage of over 21 million tons of ethylene equivalent, with an import dependency of 31%. Currently, the ethylene industry's new production capacity is continuous, with a total planned capacity of 24.82 million tons from 2025 to 2027. It is expected that if the projects under construction are put into operation as planned, the domestic ethylene shortage may be basically filled by the end of 2027. Overseas production capacity is accelerating exits, with high risks of closure in Europe and Japan/Korea. Among the global oil-made ethylene production capacity, China's production capacity started operating relatively late and is relatively advanced in terms of equipment level. On the other hand, the production capacity in Europe and Japan/Korea was established early and is located on the right side of the global cost curve, posing a higher risk of closure. The overseas production capacity expected to exit between 2025-2027 may reach 5.97-8.3 million tons, accounting for 3-4% of the global capacity. Global supply pattern reshaping, ethylene is expected to reach a turning point after 2027. Considering the situation of new additions and exits domestically and internationally, the net increase in global capacity in the next three years is expected to be around 1.126/1.565/0.84 million tons, with growth rates of 4.9%/6.5%/3.3% respectively, and the capacity growth rate is expected to decline after 2027. Taking into account the annual demand growth rate of around 3.5% and the digestion time for new capacity, the ethylene industry is expected to show marginal improvement after 2027. Strict control of total and route-specific additions, attention to follow-up policies in the domestic and international ethylene industry. The upper limit of one billion tons of refining capacity has been set domestically, but the trend of reducing oil and increasing chemical production still puts pressure on ethylene output. In July 2025, the Ministry of Industry and Information Technology and other five departments jointly initiated a survey and assessment of old chemical plant equipment, with a possibility of further clearance of old refining and ethylene capacity. The essential improvement of the ethylene industry in the future still requires controlling new capacity and shrinking investment scale. Against the backdrop of "anti-internal circulation", it is recommended to continue to focus on targeted follow-up policies in the domestic and international ethylene industry, and if total new additions can be strictly controlled, as well as controlling the deployment structure of various routes and restructuring old capacity, it may stimulate the acceleration of the industry's turning point. Risks: Rapid deployment of new capacity; policy implementation falling short of expectations; significant decline in oil prices.