Chinese Supply Glut Pushes Thailand’s Petrochemical Industry to Restructure

Chinese capacity deepens regional oversupply

Thailand’s petrochemical industry is preparing for a prolonged restructuring as new Chinese capacity, expensive feedstocks and tighter plastics regulation weaken the economics of conventional production. At the 17th PTT Group Petrochemical Outlook Forum, industry representatives said oversupply already present before the Middle East energy crisis had been compounded by oil-market disruption and growing competition from Chinese products, according to InfoQuest.

PTT Global Chemical analyst Pimkamol Julchaon said China is expected to add 15 million tonnes of polyethylene capacity between 2027 and 2030. The Middle East is projected to add 6 million tonnes and South Asia another 2 million tonnes. Polypropylene faces similar pressure: China is expected to add 9 million tonnes, South Asia 3 million tonnes and the Middle East 2 million tonnes, taking total additional PP capacity to 14 million tonnes through 2030. PP has been oversupplied since 2018, with pressure expected to ease in 2028 and conditions to improve only slightly by 2030.

Thai manufacturers lose ground at home

Chinese finished-plastic products have also gained share in Thailand. Imports or market inflows from China in affected product categories have increased by as much as 31% annually, while Chinese plastic boxes and crates rose 76%, according to PTTGC’s presentation. The trend has continued since 2021 and is affecting domestic manufacturers. Thai plastic-film production was down almost 23%, although output linked to drinking-water products continued to expand and electronics-related plastic production grew 12.4% year on year.

Underlying resin demand remains positive. Thai demand connected with plastic bags is forecast to grow 2.2% between 2027 and 2030, while bottle caps and drinking-water applications are projected to rise 2.7%. Regionally, polyethylene demand is expected to grow 6.8% in South Asia, 4.1% in Southeast Asia and 3% in China over the same period. Indonesia and Vietnam are among the Southeast Asian markets supported by improving consumption, giving producers potential outlets beyond an increasingly competitive Thai market.

Feedstock security becomes a competitive issue

Wood Mackenzie’s Asia-Pacific chemicals head Lee Andrew Fagg said Asian markets obtain about 80–90% of their oil, or roughly 20 million barrels, through the Strait of Hormuz. The Middle East conflict has disrupted refineries and chemical assets and increased the cost of imported naphtha and LPG. Oil reached $120 per barrel, hurting producers dependent on imported naphtha. China, with inventories estimated to cover up to one year, was better positioned to absorb the disruption.

About 10 million tonnes of ethylene capacity has been halted, mainly in Europe and at some older plants, Fagg estimated. North America has benefited from greater gas and polymer exports, while US ethane is becoming a more widely used feedstock. More ethane is expected to enter Southeast Asia, and PTT may consider additional imports. PTT’s access to refinery and gas-processing streams gives the group an advantage over competitors relying heavily on imported naphtha, but long-term resilience will still require more diversified supply.

Portfolio changes and recycled content

Temporary shutdowns in Northeast and Southeast Asia and permanent closures of less competitive European capacity may support margins only briefly. Thai producers are therefore considering long-term ethane contracts, higher-value products and new markets including India and Africa. Europe’s packaging and packaging-waste rules, due to require recycled material in packaging from 2030, add pressure to develop circular products. Thailand’s petrochemical industry group has asked the government for recycled-content standards, carbon rules, investment incentives, stronger local-content policies and infrastructure including water-management systems. The group expects supply and demand to approach balance around 2030, but Chinese expansion means recovery will depend on cost discipline and faster portfolio changes rather than demand growth alone.