Core Viewpoint - The Chinese ethylene industry is currently in an expansion cycle, with overseas capacity facing accelerated exit pressures. A turning point for ethylene is expected after 2027 based on global capacity deployment plans [1][3]. Industry Summary - China's ethylene industry is still expanding, with nearly 25 million tons of projects planned for the next three years. Despite rapid capacity expansion in recent years, there remains an ethylene equivalent gap of over 21 million tons in 2024, with an import dependency of 31%. The planned capacity to be added from 2025 to 2027 totals 24.82 million tons, which could potentially close the domestic ethylene gap by the end of 2027 if ongoing projects are completed as scheduled [1][3]. - Overseas capacity is accelerating its exit, particularly in Europe and Japan/Korea, where the risk of shutdown is high due to older production facilities. The capacity expected to exit globally from 2025 to 2027 is estimated to be between 5.97 million and 8.3 million tons, accounting for 3-4% of global capacity [2]. - The global supply structure is being reshaped, with net capacity increases projected at approximately 1.126 million tons in 2025, 1.565 million tons in 2026, and 840 million tons in 2027, reflecting growth rates of 4.9%, 6.5%, and 3.3% respectively. A slowdown in capacity growth is anticipated post-2027, with a marginal improvement expected in the ethylene industry due to an annual demand growth rate of around 3.5% and the time required to absorb new capacity [3]. - To improve the ethylene industry, it is crucial to control new capacity and reduce investment scale. The Ministry of Industry and Information Technology and other departments are set to evaluate aging petrochemical facilities starting in July 2025, which may lead to further clearance of outdated refining and ethylene capacity. Continuous monitoring of domestic and international policies regarding ethylene is recommended, as strict control over new total capacity and restructuring of old capacity could accelerate the industry's turning point [4]. Company Focus - Key companies to watch in the ethylene production sector include low-cost alternative route producers such as Satellite Chemical (002648.SZ) and Baofeng Energy (600989.SH), as well as private refining enterprises like Hengli Petrochemical (600346.SH), Rongsheng Petrochemical (002493.SZ), and Dongfang Shenghong (000301.SZ). State-owned refining company Shanghai Petrochemical (600688.SH) is also noteworthy, along with other related companies like Huajin Co. (000059.SZ) [5].

Group 1 - The core viewpoint is that China's ethylene industry is still in an expansion phase, with significant new projects planned, while overseas capacity is facing accelerated exit pressures. A potential turning point for the ethylene market is anticipated post-2027 if domestic and international policies effectively control new capacity and restructure old capacity [1][2]. Group 2 - China plans to invest nearly 25 million tons in ethylene projects over the next three years, with a projected ethylene equivalent gap exceeding 21 million tons by 2024, leading to an import dependency of 31%. If ongoing projects are completed as scheduled, the domestic ethylene gap may be largely filled by the end of 2027 [1]. - The risk of capacity shutdowns is high in Europe and Japan/South Korea, with an estimated 5.97 to 8.3 million tons of capacity expected to exit globally between 2025 and 2027, accounting for 3-4% of global capacity [1]. - The global supply landscape is being reshaped, with net capacity increases projected at approximately 1.126 million tons in 2025, 1.565 million tons in 2026, and 840 million tons in 2027, reflecting growth rates of 4.9%, 6.5%, and 3.3% respectively. A marginal improvement in the ethylene industry is expected post-2027 due to a demand growth rate of around 3.5% annually [2]. - Domestic policies are crucial for the ethylene industry, with a cap on refining capacity set at 1 billion tons. The potential for further clearing of outdated refining and ethylene capacity exists, especially following evaluations initiated by the Ministry of Industry and Information Technology in July 2025 [2].

Core Viewpoint - The current expansion cycle of ethylene in China is ongoing, with overseas production capacity facing accelerated exit pressure. A turning point for ethylene is expected post-2027 based on global capacity deployment plans [1] Industry Summary - Ethylene is currently in an expansion phase in China, indicating growth potential in the sector [1] - There is an anticipated turning point for ethylene production after 2027, contingent on global capacity deployment strategies [1] - Domestic and international policies that effectively control the total new ethylene capacity and restructure outdated production capacity could expedite the industry's turning point [1]

Core Viewpoint - The Chinese ethylene industry is currently in an expansion phase, with a projected capacity increase of nearly 25 million tons over the next three years. However, a significant supply gap of over 21 million tons is expected to persist until 2024, with an import dependency rate of 31% [2][5][28]. Group 1: Current Industry Status - China's ethylene capacity has grown from 28.54 million tons in 2019 to 53.74 million tons in 2024, with a net increase of over 25 million tons driven by the expansion of private refining and integrated projects [5][7]. - Despite rapid capacity expansion, the import dependency for downstream products remains high, with polyethylene and ethylene glycol import dependency rates at 34% and 26%, respectively [5][8]. - The planned capacity for new projects from 2025 to 2027 totals 24.82 million tons, with expected annual increases of 20%, 12%, and 9% for those years [7][25]. Group 2: Global Supply Dynamics - The global ethylene supply landscape is undergoing a transformation, with an estimated net increase in global capacity of approximately 1.13 million tons in 2025, 1.57 million tons in 2026, and 840,000 tons in 2027, reflecting growth rates of 4.9%, 6.5%, and 3.3% respectively [3][25]. - Significant capacity exits are anticipated in Europe and Japan, with a total of 597 to 830 million tons expected to be shut down between 2025 and 2027, representing 3-4% of global capacity [2][24][25]. - The exit of older, less competitive capacity in Europe and Japan is driven by high production costs, with European ethylene production costs estimated at $885 per ton, significantly higher than the $200-$350 per ton costs in the U.S. and Middle East [16][19]. Group 3: Future Outlook - The ethylene industry is expected to reach a turning point post-2027, with potential marginal improvements in the market as new capacity aligns more closely with demand growth, which has historically been around 3.5% annually [3][25]. - If domestic and international policies effectively control new capacity and restructure older facilities, the industry may see accelerated recovery and a shift towards net exports by 2027 [39][40]. - The Chinese ethylene market is projected to account for approximately 35% of global capacity by 2027-2028, with a significant portion of new capacity concentrated in China and the Middle East [28][29].