BLOG: China’s Petrochemical Plans Clouded by Trade War, Demand Risks

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

China is in the process of drafting its 15th Five-Year Plan (2026–2030) in a geopolitical and economic environment that suggests the need for greater self-reliance.

It might be fair to assume this will include a continued push toward petrochemical self-sufficiency.

But China is to cap refinery capacity from 2027 onwards due to the rise of electric vehicles. This reduced need for gasoline could mean not enough new naphtha, LPG or other refinery feedstocks to support further petrochemical plant construction.

China might instead import more feedstocks from the Middle East or continue to repurpose existing refineries to make more petrochemical feedstock. This is already the direction of travel through Saudi Aramco investments in China.

Add rumours of coal-to-chemicals rationalisation and closures of older plants, and the picture gets even murkier.

Conflicting reports say either China is slowing petrochemical construction following the trade war —or pressing ahead and raising operating rates to the mid-80% range (up from high-70s post-Evergrande Turning Point).

Demand is another major variable. Growth was already slowing before the trade war and could now turn negative in 2025.

A document from China Customs (25 April) pointed to possible waivers for US polyethylene and ethane imports—but not for ethylene glycol or propane.

Nearly 60% of China’s propane imports came from the US in 2024. With a 125% tariff still in place, China would be unable to replace those volumes quickly, putting PDH propylene production under pressure.

This matters: 32% of China’s propylene capacity is now PDH-based, and 70% of propylene is used to make PP. ICIS expects PDH operating rates to fall to below 59% in 2025 (from 70% in 2024).

Could this mean a propylene shortage?

Not necessarily. Output from crackers, refineries and coal could increase—especially if, as one Middle East source suggests, China pursues greater PP self-sufficiency.

Taking into account all these variables, and the extent to which China can export PP based on the level of trade tensions, consider these scenarios for China’s PP net imports in 2025–2028:

• The ICIS Base Case: They average 3m tonnes/year.
• Alternative 1: 600,000 tonnes/year with some years of net exports
• Alternative 2: 1.4m tonnes/year, with again some years of net exports

My gut feel is that China will do its best to boost petrochemicals self-sufficiency.

But you cannot take my always fallible words as the final words. You must extend and deepen your scenario planning in this ever-murkier environment.

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.