BLOG: The Illusion of Free Markets in Petrochemicals

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson.

Is the petrochemicals industry really a free market? Or have we been telling ourselves a comforting fiction?

As we sift through margins, P&Ls, and operating rates to predict a recovery, we might be asking the wrong questions.

Let’s rewind to 2014.

While China’s state media signalled a major push toward self-sufficiency in petrochemicals, many Western analysts dismissed it — seeing China through the lens of profit maximisation. But I was told way back in 2000 that China’s strategy had just as much to do with jobs and economic value creation as with profits.

Fast forward to today: polyester fibres, , polyethylene terephthalate (PET) film and bottle grade resins, purified terephthalic acid (PTA), styrene and polypropylene (PP),— China is nearly or completely self-sufficient in these markets. The drivers? National security, supply certainty, and industrial policy.

And it’s not just China. Middle East investments — underpinned by cheap feedstocks, state ownership, and now oil demand substitution — follow similar, non-market logic.

If key players haven’t been led by market signals alone, what happens next?

Despite the deepest downturn in petrochemical history — likely to stretch into 2028 — new capacities keep rising. Not from those chasing short-term profit, but from those with long-term, state-backed agendas.

Just a modest rise in China’s PP operating rates above the ICIS base case assumption could flip China into being a net exporter by 2027. The trade war may play a role here, as it has increased supply security concerns.

True, there are more private petrochemical companies in China than ten years ago. But this latest wave of investment is more state-owned-enterprise-led than the previous one. And private companies can also benefit from local and central government support

Saudi investments in refinery-to-petrochemicals will persist. More ethane crackers in the Middle East will be built.

China’s plant-build costs are often 50%+ lower than the U.S., thanks to relentless innovation support.

So… what does this mean for producers operating on pure market terms? Can they survive, let alone thrive, in a landscape shaped by strategic ambition rather than shareholder return?

Your thoughts are welcome. Let’s start the conversation.

Editor’s note: This blog post is an opinion piece. The views expressed are those of the author, and do not necessarily represent those of ICIS.