Five personal predictions for chemicals markets in 2025

By John Richardson

IT IS THAT time of the year again when analysts need to put their reputations on the line and make forecasts for the following year. So, see above the slide with my five forecasts for 2025 with detailed descriptions as follows:

1. Despite reports of a slowdown in construction in China due to carbon reduction targets under the 2021-2025 Five-Year-Plan, there will be enough new capacity coming onstream next year to push China closer to self-sufficiency in some chemicals and polymers such as polypropylene (PP). The boat has already sailed on products such as purified terephthalic acid and styrene where China has, in recent years, swung into net export positions. What will further bolster China’s self-sufficiency will be the country’s long-term decline in demand growth. China’s operating rates will be higher than sometimes assumed as China will prioritise self-sufficiency over individual plant economics. In other words, plants will be run harder than implied by the weak growth environment. This is because China wants to achieve supply security for geopolitical regions while also, if possible, (see point 3) increase its direct and direct exports of chemicals and polymers.
2. We are seeing a long-term shift in global growth momentum away from China to the much more populous and much more youthful mega-region of the Developing World ex-China. Part of this process involves relocation of manufacturing capacity from China to countries such as Turkey, Mexico, Vietnam and India for cost and geopolitical reasons, and this will continue in 2025. Deals will be done by the Trump administration on tariffs as competitively priced imports will have to come from somewhere – and because of the intricate and complex integration of manufacturing supply chains. This will make understanding what’s happening in the Developing World ex-China’s chemicals markets more important as the demand shift from China continues in 2025. This point is illustrated by ICIS estimates of PP annual average net imports by Turkey, India and Africa etc. in 2024-2030 (see the above slide).
3. Since 2021 and the Evergrande Turning Point, China had doubled-down on exports up and down manufacturing chains, reducing the room for competitors in low, medium and high-value industries. This includes its switch to net export positions in products such as PTA and styrene, and the potential for this to happen in products such as PP, ABS and polycarbonate. All these latter three polymers can be higher value, depending on their grades and end-use applications. I therefore believe that antidumping, tariff and other protectionist measures against China will accelerate in 2025. China will respond in kind.
4. First came the pandemic-related disruptions to global container shipping and, since February of this year, we’ve had to contend with the Houthi attacks on shipping that have disrupted access to the Suez Canal via the Red Sea. Access to cost-efficient and prompt logistics will remain a key competitive advantage in 2025 for chemicals companies as global trade flows continue to be disrupted, whether it is the Houthi effect and/or some other yet-to-emerge disruption. Among next year’s winners will be the trading, distribution and shipping companies that provide cost-efficient and prompt delivery as part of their services.
5. The ICIS numbers tell us that because of disappointing Chinese demand – and the scale of global capacity closures required to bring markets back into balance – a new upcycle in 2025 is a very remote possibility. Expect no upswing for at least the next three years, probably longer, because of the scale of the shutdowns necessary. There can be no major upsides for demand because of China’s dominant role in driving consumption and the extent to which today’s consumption in China is falling short of the pre-Evergrande Turning Point expectations. The data tell is that even if demand in the other regions of the world surprised on the upside in 2025, this wouldn’t be enough to compensate for Chinese demand growth that is likely to be in the low single digits, perhaps even negative for some chemicals. On the scale of capacity closures, let’s take propylene as an example following my earlier post on ethylene. What would it take to return global operating rates to the very healthy 1992-2023 average of 81%? Assuming global production, which is about the same as demand, stays unchanged from our base case, global capacity would have to grow by an average of around 1.2m tonnes a year versus our base case of growth of 7m tonnes a year. Advantaged projects in the Middle East seem likely to still go ahead under this alternative scenario with China further increasing its self-sufficiency, at least in the short term. This implies a great many capacity closures elsewhere to get to the 1.2m tonnes a year of 2024-2030 capacity growth necessary to return to healthy operating rates. In propylene and many other value chains, we won’t see enough closures in 2025 to turn the cycle around. A significant number of companies will still be evaluating difficult decisions to shut down due to environmental clean-up costs, the need to continue to operate to support upstream refineries and the chance, however remote, that an upswing is just around the corner.

I could be wrong, of course. I’ve been advised not to keep saying this, but strongly I disagree as nobody likes somebody who never concedes when they are wrong, moves on from the history of where and when they have been wrong, and continues to assume that they will always be right At the end of 2025, I will thus review these forecasts and give you my score out of five.

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