No end in sight for suffering petrochemical players

THE global petrochemical industry continues to struggle, and this is showing in the local context with the latest financial performance of PETRONAS Chemicals Group Bhd and Lotte Chemical Titan Holding Bhd, as both saw losses widening for the financial year ended Dec 31, 2025 (FY25) compared to FY24.

The industry is still looking for an equilibrium to the supply-demand balance, as demand remains tepid for a number of years now and does not look like it will be coming back anytime soon. Oversupply remains a major issue.

Both the International Monetary Fund and the World Bank have projected a moderation in global economic growth this year and in 2027, which in turn does not bode well for the industry, as slowing economic growth means slower manufacturing growth too.

The industry’s place in the value chain of various industries makes it vulnerable to the economic slowdown, as it produces intermediate materials such as olefins and aromatics that are then manufactured into various consumer products from plastics to detergents.

With oversupply comes the loss of pricing power and the situation keeps getting worse because the overcapacity means high under-utilisation rates for cracker facilities, the plants used to produce plastic and petrochemical feedstock for various consumer items.

Lotte Chemical shut down a plant in FY24 to pare losses.

According to BIMB Securities in a report on the industry last December, the overcapacity situation risks locking the industry into a prolonged downturn and that only the lowest-cost producers with access to large end-markets will survive.