China’s Petrochemical Output Falls as Rising Costs Squeeze Margins

China’s petrochemical industry is scaling back production as higher feedstock costs, driven by ongoing tensions in the Middle East, continue to pressure margins. Recent reports indicate that output has dropped to its lowest level in nearly three years.

A significant portion of production capacity has been taken offline, with around 20% of facilities either idled or operating at reduced levels. Overall industry utilization has slipped to roughly 68%, reflecting the strain on profitability.

One of the key cost drivers has been the sharp increase in prices of purified terephthalic acid (PTA), a crucial input for polyester manufacturing. Prices have surged substantially since the start of the conflict, moving well above earlier levels and cutting into producers’ earnings.

Although crude oil prices have eased slightly from recent highs, they remain elevated, continuing to impact feedstock costs across the sector. At the same time, disruptions in global supply chains have made it harder for refiners to secure stable and affordable crude supplies.

In international markets, buyers are increasingly competing for alternative crude sources, often paying significant premiums to replace disrupted Middle Eastern shipments. This has added further cost pressure across the value chain.

While China has been somewhat shielded from the most severe supply disruptions, global price movements are still affecting domestic industries. The combination of higher input costs and uncertain demand is forcing producers to adjust output, signaling ongoing challenges for the petrochemical sector.

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