Despite the post-pandemic recovery, the global petrochemical sector has failed to stabilise. Overcapacity, slowing demand growth, and intensifying competition have pushed margins to their lowest levels in more than a decade. Persistent oversupply will remain the dominant challenge through the end of this decade.
Global utilisation rates for core commodities have dropped well below their historical averages. At the same time, capacity continues to expand in China and the Middle East, further flattening margins. As this trend continues, the future petrochemical market will likely take one of three different forms. In the first scenario, feedstock-rich regions and growth markets lead global trade. The second likely outcome is national oil companies (NOCs) dominate through scale and integration. In the third scenario, protectionism drives the emergence of regional champions.
Southeast Asian players must now consider the road ahead. It remains one of the few regions with solid demand growth, yet must react to a world where global oversupply has dragged down returns. Globally, annualised total shareholder return (TSR) fell to -1% between 2019 and 2024, compared with 15.3% for the S and P 500 – a gap that has weighed on SEA players despite strong local demand.
In response to these industry headwinds, companies across Southeast Asia have made difficult but strategic choices. In the Philippines, JG Summit shuttered its naphtha cracker in January-which produced 480,000 tonnes of ethylene and 240,000 tonnes of propylene annually-citing high costs and weak margins. Meanwhile in Malaysia, Lotte Chemical Titan paused operations at its Pasir Gudang Complex in December to mitigate losses.
In this challenging landscape, the next steps for the region’s industry players will have major implications for future growth.
Rationalisation as the first step
This is not the first time petrochemicals has faced margin compression, but the persistence of today’s imbalance has created urgency.
European players have already moved to rationalise capacity. Sabic closed its Olefins 3 cracker in the Netherlands, removing 550,000 tonnes of ethylene capacity. In France, ExxonMobil shut its Gravenchon steam cracker, losing 425,000 tonnes of ethylene and 290,000 tonnes of propylene capacity.
In our latest report, Preparing for the Next Wave of Petrochemical Consolidation,Boston Consulting Group (BCG) analysis reveals that at least 10 million tonnes per annum of global cracker capacity must be rationalised to restore balance. Without such action, utilisation rates will remain depressed, undermining investment capacity for the transition to low-carbon and downstream products.
Counting on consolidation
Rationalisation alone will not be enough. Consolidation has become the sector’s strongest lever to cut costs, capture synergies, and reposition for resilience.
We already see early signs of industry adapting to this need. More than 300 deals were announced in 2024-among them INEOS’s acquisition of TotalEnergies’ 50% stake in Naphtachimie, Appryl, and Gexaro, which previously operated as joint ventures. These deals seek to leverage crucial sources of advantage, whether that’s feedstock, access to new markets, technology, portfolio diversification, or greater control over key value chains.
In Southeast Asia, consolidation is already reshaping the landscape. Chandra Asri, in partnership with Glencore, acquired Shell’s Singapore refinery and petrochemical assets, before purchasing Chevron Phillips’ polyethylene plant-in doing so adding 400,000 tonnes annual capacity. These moves demonstrate how regional players are seeking scale and integration to compete in an unforgiving market.
Three futures that could reshape petrochemicals
The next decade will be pivotal for the petrochemical industry, with value creation shifting dramatically depending on how global dynamics play out. Our analysis points to three possible futures, each with very different implications for Southeast Asian producers.
The first scenario sees feedstock- and market-advantaged players pulling ahead. Producers in the United States and the Middle East are positioned to dominate global exports thanks to their low-cost feedstock base, while India and China capitalise on domestic demand growth to strengthen self-sufficiency. In such a world, companies in Southeast Asia would be at a structural disadvantage. Regional producers would need to accelerate their move downstream into higher-value or speciality products where differentiation can offset cost disadvantages. Those unable to make this pivot risk being priced out of the global market.
In the second scenario, NOCs rise to dominance. As global transport-fuel demand slows, many NOCs are reintegrating petrochemicals into their portfolios to capture growth and diversify earnings. Armed with government backing, large-scale mergers and acquisitions, and heavy investments in technologies such as crude-to-chemicals, these players could secure an outsized role in the global industry. Southeast Asian producers would face tougher competition from nationally supported companies, unless they form strategic partnerships or focus on specialised products.
The third scenario is defined by the rise of regional champions in a protectionist world. Trade barriers and tightening environmental regulations could slow global flows and push countries to develop self-sufficient value chains. In this context, petrochemical industries would consolidate around two to three dominant players within each region. For Southeast Asia, strong local demand growth could provide a platform for such champions to emerge. But success would hinge on consolidation and integration. Without sufficient scale, even promising domestic players would struggle to compete against better-integrated rivals in neighbouring regions.
The case for bold action
It’s clear that consolidation is no longer optional, regardless of which scenario plays out.
The region does face key structural disadvantages in charting the route forward. Unlike rivals in the US and Middle East, Southeast Asian producers lack low-cost feedstock, while China’s mega-plants benefit from greater scale and lower capital intensity. Southeast Asian players sit in the third quartile of the global cost curve for several key petrochemical commodities, leaving them vulnerable in an increasingly competitive environment.
Some regional players are already testing new approaches. One company is pioneering feedstock flexibility by importing ethane from the US to supply its regional petrochemicals complex, lowering costs by more than 30%. Others are exploring mergers to integrate assets and build resilience.
The challenge now is urgency. As consolidation reshapes the global industry, Southeast Asian producers must act decisively to scale, integrate, and reposition. Those that move boldly can become regional champions. Those that delay, risk being sidelined in the next era of petrochemicals.