China PE Industry Landscape Evolution Amid Challenges
Introduction: China’s PE capacity continues to expand in 2025, with the industry landscape transforming amid intensifying internal competition. Producers are striving to reduce costs, enhance efficiency, and develop new products. Boosting domestic demand and expanding exports are key strategies to address both internal and external challenges.
I. Changes in Production Amid Competitive Dynamics
In 2025, despite falling crude oil prices easing cost-side pressure for oil-based PE producers, cautious feedstock procurement by downstream producers amid sluggish demand limited the upward momentum of PE prices. While the gross profit from producing oil-based LLDPE turned positive, profitability remained narrow. Meanwhile, coal-based LLDPE producers saw improved earnings through better cost management.
Competition in the PE market intensified in 2025, driving strong demand for cost reduction and efficiency gains among producers. They worked to balance production with sales and optimize material flows to maximize returns. Although both oil-based and coal-based PE producers registered YoY profit improvement, oil-based PE producers fell back into loss in H2 2025 due to upward fluctuations in international oil prices and the startup of new LLDPE units in China. Coal-based PE producers, however, achieved further profit growth. Additionally, U.S.-China trade friction made ethane supply a critical constraint for PE producers based on light ends, so some of them implemented partial unit shutdowns and technical upgrades to escape losses.
Faced with persistent losses and guided by the national “anti-involution” policy, oil-based PE producers significantly accelerated their transformation and upgrading efforts. Following the long-term shutdowns of Heilongjiang Haiguo Longyou Petrochemical and Shenyang Chemical, Sinopec Yanshan Petrochemical also ceased operations. Enterprises, including PetroChina Fushun Petrochemical and Sinopec Qilu Petrochemical, undertook upgrade projects. Producers represented by Sinopec and PetroChina strengthened upstream-downstream industrial chain integration and production-sales coordination. Regional interaction noticeably increased, with greater attention paid to evolving downstream demand. Producers raised the development and output share of specialized and high-grade materials, increased customized production share, expanded export share, and adopted more flexible sales strategies. Coal-based PE producers, benefiting from expanding profits, increased capacity and operating rates, significantly lifted sales volume, and intensified competition with oil-based PE producers in the general-purpose materials segment.
II. Trade and Regional Flow Adjustments Under Competitive Pressure
Since the onset of U.S.-China trade disputes, China has implemented policies to mitigate their adverse impacts, including measures to boost domestic demand, promote emerging industries, and optimize the export structure. Against the backdrop of continued PE capacity expansion, simultaneously strengthening domestic demand and expanding exports became the primary approach to cope with internal and external challenges.
Confronted with trade war pressure, domestic demand became the principal driver of economic development. Policies aimed at stimulating consumption and boosting domestic demand were rolled out to fuel economic growth. As further policies are implemented, the PE industry’s domestic and international trade patterns are set for ongoing adjustment, supporting growth through domestic consumption, encouraging technological innovation, and fostering industries like new energy, high-end manufacturing, and biopharmaceuticals.
With PE supply steadily rising, North China, East China, and South China remained the primary production and consumption regions. Supply within these regions grew continuously, intensifying competitive pressure. Central China and Southwest China saw relatively limited new capacity additions. The three major regions gradually expanded their reach into Central and Southwest Chinese markets. Following the startup of PetroChina Guangxi Petrochemical Company, supplies from South China are expected to extend their coverage to Guangxi, Yunnan, and Guizhou.
Examining corporate strategies, Snopec and PetroChina primarily maintain ex-works sales, further optimizing their industrial layout and reducing logistics and warehousing costs. Inter-regional transfers are forecast to continue declining. Local refineries and joint ventures expand delivery zones and improve service quality. Constrained by long transportation distances, coal-chemical producers further reduce shipments to South China, instead developing inland markets such as Liaoning, Xi’an, Wuhan, and the Sichuan-Chongqing region.
China is expected to actively optimize its export structure, diversify its trade partnerships, and reduce reliance on any single market. China’s trade partnerships are likely to undergo a significant shift: the Northwestern “Silk Road” region may emerge as a new trade hotspot, Russian supplies in the Northeast may gain greater attention, while exports from East China and South China may face obstacles due to anti-dumping measures.
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