Over 2 Million Tonnes of PE Capacity Offline Amid Market Rebalancing Efforts
A recent wave of plant shutdowns among polyethylene (PE) producers across southeast Asia has been seen by some as a reflection of how dire the situation in the market is.
At the same time, many also believe such actions are needed to rebalance a market plagued by oversupply.
- Over 2 million tonnes of capacity shut in recent months
- Most shutdowns due to commercial reasons
- No panic buying yet seen in the market
Over the last six months in southeast Asia, over 1 million tonnes of linear low-density PE (LLDPE) and over 1.3 million tonnes of high density PE (HDPE) nameplate capacity have been taken offline.
This was mostly due to plant operators trying to stem the wave of losses incurred by a combination of high production costs and low prices.
In the past, such drastic reductions of prompt PE supply available to buyers in southeast Asia would have triggered worries about panic buying and severe spot market shortages.
This time around, buyers and traders appear to have shrugged off the potential impact of the shutdowns while some suppliers have even quietly welcomed the shutdowns as necessary.
“I don’t think the panic situation will occur,” said a market source.
In the week ended 7 February, Malaysia’s Pengerang Refining and Petrochemical (PRefChem) was the latest producer to have shut its downstream polymer production units.
This has taken PRefChem’s total capacity of 750,000 tonnes/year of PE out of the market for at least 1-2 months, according to market sources.
Although the cause of PRefChem’s latest shutdown is unknown, it comes hot on the heels of similar decisions taken by other producers in southeast Asia.
These include Vietnam’s Long Son Petrochemical, the Philippines’ JG Summit Olefins and Malaysia’s LOTTE Chemical Titan, all of which have either partially or fully shut their polymer units for commercial reasons.
None of the producers have given any firm indications of when they plan to restart.
“This means that cheap [PE] cargo is no longer easily available,” said one market source.
The shutdowns in southeast Asia also appear to have coincided with some unplanned shutdowns in the Middle East, which also seems to have further reduced supply for importers in southeast Asia, particularly for the LLDPE segment.
Some market sources said these shutdowns in southeast Asia, while painful for employees there, should be seen as a much-needed antidote to address at least some of the supply overhang, against a backdrop of very slow downstream demand.
“Good, all these shutdowns will reduce the oversupply,” said another source.
In theory, PE consumption in southeast Asia’s biggest markets – Vietnam, Indonesia, Thailand, Malaysia, the Philippines – still exceeds capacity and the region remains a major export market.
Nevertheless, PE demand has been in the doldrums since the start of the COVID-19 pandemic in 2020.
Many plants in southeast Asia plants rely on naphtha to produce ethylene (C2), which is then used to produce PE and other downstream products.
ICIS data show the spread between C2 and PE has been weak for an extended period of time, raising production costs and reducing the incentive for producers to increase their PE production rates.
In addition, ICIS data show LLDPE import prices in southeast Asia currently holding at just off their one-year lows, at $960-1,000/tonne CFR (cost and freight) SE (southeast) Asia Dutiable in the week ended 7 February.
HDPE film import prices are also at their lowest since July 2023, at $940-960/tonne CFR SE Asia Dutiable in the week ended 7 February.
“So despite all these plant shutdowns and the reduced supply, it’s still very hard to increase prices as demand is still very weak,” a market source said.
While many market players separately expect suppliers to independently increase their offers in light of the more recent plant shutdowns, some called for caution, given that demand fundamentals have shown little signs of improvement since the start of 2025.
“Some… customers are back to work this week and they wait and see on the market situation after the holiday. They are not rushing to restock,” another market source said.
In the latest ICIS price forecast report, ICIS analysts said they expect some seasonal demand increases in March to drive prices higher.
“On top of this, supply in southeast Asia is expected to be relatively tight during this period as plants undergo seasonal turnarounds and because of prolonged outages due to margin challenges,” the analysts added.
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