Bain & Company estimates the chemicals industry must remove a net 35 million metric tons of olefin capacity by 2030 to restore normal operating rates, underscoring the scale of its global surplus.
The target represents about 7.5% of worldwide olefin capacity. Bain forecasts that chemical plants will run below their historical average utilization through 2030 despite record shutdowns. “This time, demand growth alone won't absorb the excess capacity,” said Piet de Paepe, Bain's global head of Chemicals practice.
Raw material prices divide producers. Bain expects U.S. ethane to cost about $300 to $400 per ton less than Asian naphtha. It identifies U.S. and Middle Eastern producers using ethane as better positioned on costs. Across Europe, Eastern Asia and Southern Asia, more than half of cracker fleets depend on naphtha, Bain said. Producers using ethane can also lose flexibility if its supply is disrupted.
China's capacity additions have outpaced closures in Europe, Korea and Japan, the consultancy said. In some chemicals, Bain estimates China's capacity now meets or exceeds worldwide demand. It projects China will become a net exporter of most base chemicals and says the resulting surplus will affect trade flows and producers' margins.
Bain also expects China to gain ground in specialty chemicals. It projects the country will hold more than 30% of that global market by 2030. The firm says Chinese chemical makers spend more on research and development than U.S. or European peers and have improved their speed to market and customer service.
By 2030, Bain expects China, the Middle East and North America to account for close to 70% of global ethylene capacity. The forecast adds to the firm's picture of an industry facing both excess capacity and uneven production costs.
Bain urged companies to direct investment toward products and regions where they have a cost or innovation advantage and to exit or consolidate elsewhere. It recommends deciding within 12 to 18 months whether to close or convert high-cost, carbon-exposed assets.
