# Ethylene: Cycles

Inside the capacity glut squeezing Asian crackers

Source page: https://www.materialinsights.org/chemicals/ethylene/cycles/

What this tab covers How its prices and margins move: past booms and busts with price levels, the spread or margin that the industry watches, the drivers of the cycle and the metrics to track.

Ethylene margins follow a long capacity cycle. Crackers take four to five years to build and are added in waves when margins are high, then run below 85% for years. The floor is set by cash cost of the marginal naphtha cracker in Asia or Europe; when naphtha margins stay negative, as in 2023-2025, older plants close. The ceiling is set by outages and feedstock shocks: hurricanes in the US Gulf, the 2021 Texas freeze and the 2026 Strait of Hormuz disruption all spiked prices. China's self-sufficiency drive since 2019 has made the current trough unusually long.
 The spread to watch **Ethylene minus naphtha (Asia) and integrated ethane-to-PE margin (US)**

Asian spread = CFR NE Asia ethylene minus CFR Japan naphtha, per tonne. The break-even level depends on the basis: S&P Global Platts cites a typical break-even of about $250/t for integrated and $350/t for non-integrated producers (Sep 2022), while ChemOrbis's December 2025 figures (naphtha $560-580/t, break-even ethylene about $800/t) imply a cash break-even of about $220-240/t. Prices sat in the $700s, below break-even. US integrated ethane-to-PE margin averaged about $580/t in early 2026 (Argus).

#### Booms and busts

1. 2008-2009

Financial crisis demand collapse just as Middle East ethane crackers started. Asian prices fell by more than half in months.

Asian ethylene fell from about $1,400/t mid-2008 to about $500-600/t in December 2008 (indicative, ICIS historical)

2. 2021-2022

Post-Covid demand rebound plus the February 2021 Texas freeze that shut most US crackers, then the 2022 oil spike after Russia invaded Ukraine.

NE Asia ethylene above $1,100/t in 2021-2022 (indicative, ICIS); naphtha cracker margins turned negative by 2022

3. 2023-2025

Record Chinese additions pushed global utilisation to 79% (2023). Asian naphtha crackers lost money three years running; Europe closed over 4 Mt. US prices hit three-year lows.

Asian naphtha cracker margins -$195/t (2023), -$170/t (2024), -$158/t (2025 to Aug); US ethylene about $364/t in Nov 2025 (Argus)

4. March-September 2026

US-Israeli strikes on Iran from 28 February all but closed the Strait of Hormuz: oil flows fell below 1 mb/d in April. Flows recovered only partly after the 8 April ceasefire and 17 June memorandum, to about 82% of pre-war in October, with renewed attacks (Reuters/Kpler). Gulf naphtha and polymer exports were cut; QatarEnergy, Borouge and Sadara halted or cut cracker output (ChemOrbis, Apr 2026).

Asian naphtha margin over Brent rose from about $108/t to above $400/t (LSEG via Hydrocarbon Processing, Mar 2026); European ethylene contract up €35-55/t in March and several hundred euros in April (Plastics Today, May 2026); Brent peaked at $118/bbl in March (Reuters)

#### What drives the cycle

- **Chinese capacity additions.** China adds 7-11 Mt of ethylene a year in 2025-2027, more than world demand growth, so its build rate sets global utilisation.
- **Crude and naphtha versus gas prices.** The oil-to-gas ratio decides how far ethane crackers undercut naphtha; ethane was $100-150/t cheaper than naphtha in 2025 at $60/bbl crude.
- **Middle East shipping and geopolitics.** About $20-25 billion of petrochemicals cross the Strait of Hormuz a year (Rabobank via Hydrocarbon Processing 2026); disruption lifts Asian prices quickly.
- **European closures and carbon cost.** Closures of 15-20% of European capacity and tighter EU ETS benchmarks remove high-cost supply and shift Europe to imports.
- **Polyethylene demand.** Packaging demand tracks consumer spending; any slowdown in China flows straight into PE and ethylene prices.

#### Metrics to track

| Metric | Why it matters | Where to track it |
|---|---|---|
| **Asian cracker operating rates** | Below 80% signals oversupply and closures | Argus, ICIS |
| **Ethylene-naphtha spread CFR NE Asia** | Direct measure of marginal producer economics | ICIS, Platts, ChemOrbis |
| **US Gulf ethane price and ethane exports** | Sets the global low-cost floor | EIA, Argus |
| **China cracker start-up schedule** | Timing of 10 Mt a year of new supply | Argus, Mysteel, ICIS |
| **Strait of Hormuz shipping flows** | Middle East export disruption risk | S&P Global, Kpler, Hellenic Shipping News |

## Other sections

- [Summary](https://www.materialinsights.org/chemicals/ethylene/index.md)
- [Overview](https://www.materialinsights.org/chemicals/ethylene/overview/index.md)
- [Correlation](https://www.materialinsights.org/chemicals/ethylene/correlation/index.md)
- [Production route](https://www.materialinsights.org/chemicals/ethylene/routes/index.md)
- [Production](https://www.materialinsights.org/chemicals/ethylene/production/index.md)
- [Feedstocks](https://www.materialinsights.org/chemicals/ethylene/feedstocks/index.md)
- [Trading](https://www.materialinsights.org/chemicals/ethylene/trading/index.md)
- [Movement](https://www.materialinsights.org/chemicals/ethylene/movement/index.md)
- [Regulation](https://www.materialinsights.org/chemicals/ethylene/regulation/index.md)
- [Characteristics](https://www.materialinsights.org/chemicals/ethylene/characteristics/index.md)
- [Emissions](https://www.materialinsights.org/chemicals/ethylene/emissions/index.md)
- [Relationships](https://www.materialinsights.org/chemicals/ethylene/links/index.md)