Asian Petrochemical Producers Cautious in Raw Material Procurement

Geopolitical unrest, trade tensions, and crude oil price volatility

Amid overlapping geopolitical instability and trade tensions, fluctuating crude oil prices have created significant uncertainty for Asian petrochemical producers regarding raw material supply. At the 2025 Asia Pacific Petroleum Conference (APPEC) held in Singapore, industry experts discussed this critical challenge. They noted that Asian petrochemical producers are becoming increasingly cautious in raw material procurement, with low-cost feedstocks such as ethane emerging as a new industry focus.

Taking crude oil as an example, April Tan, Vice President of Technical Research at S&P Global Commodity Insights, pointed out that oil prices have dropped from nearly $100 per barrel in 2024 to below $70 per barrel in recent weeks. Such sharp fluctuations have significantly impacted petrochemical producers. She further stated that oil prices are expected to stabilize around $65 per barrel by 2026, under which circumstances producers must exercise greater caution when selecting feedstocks.

The conference panel discussion centered on the competitiveness of Crude Oil to Chemicals (COTC) technology as a feedstock source for cracking units. Anthony Tso, Deputy Director for C4 and Elastomers in the Asia-Pacific region at S&P Global Commodity Insights, said most current COTC operations rely on integrated models to gain advantages. He explained that integrated facilities simplify logistics and reduce costs, with nearly 50%-60% of their output dedicated specifically to chemical production. Moreover, COTC units allow producers to flexibly adjust output according to market demand, switching efficiently between fuels and chemicals, thus offering exceptional operational flexibility.

Tso also mentioned the "Shahin Thermal Cracking Crude-to-Chemicals" (TC2C) plant, a joint venture between Saudi Aramco and South Korea's S-Oil, scheduled to begin operations in Ulsan in 2026. While he acknowledged such projects positively advance the conversion of crude oil into diverse petrochemical feedstocks, he cautioned that the payback period for these investments may be relatively long.

Rajesh Rawat, Head of Cracking Business at India’s Reliance Industries, said current feedstock procurement faces volatility, making “economics” the core driver behind producers’ feedstock choices. Ethane is a prime example of a low-cost feedstock, but limited supply remains a major challenge for buyers. Rawat noted that ethane buyers in India, China, Latin America, and Europe currently rely heavily on imports from the United States.

Rawat added that while historically petrochemical producers allocated most capital expenditures to production facilities, this trend is shifting, with increasing investment now directed toward securing feedstock supplies such as ethane. Although such investments can yield returns, they also carry substantial risks. When asked about the “overreliance of ethane buyers on U.S. supply,” Rawat clearly identified it as the primary risk. These risks include not only trade barriers like tariffs but also supply chain disruptions—such as blockages in key waterways like the Suez Canal or terrorist attacks on maritime infrastructure.

Regarding monomer markets, Anthony Tso analyzed that butadiene demand is more predictable than other C4 monomers due to its close ties with industries like automotive. As for the outlook for other C4 monomers such as isobutylene, he noted that isobutylene is primarily used to produce blending components like methyl tertiary butyl ether (MTBE), but MTBE demand remains persistently weak. Aside from blending, isobutylene is used in other downstream products, whose demand growth is expected to be “moderate,” lagging behind that of butadiene.

Rawat highlighted concerns over the supply of key petrochemical feedstocks. If ethane cracker capacity continues to expand, the optimization (via shutdowns or production cuts) of older cracking units in Asia could impact the supply of C5-based feedstocks. He explained that naphtha crackers already produce limited volumes of C5 products such as isoamylene and dicyclopentadiene, yet demand for these products remains strong. The industry needs to find ways to extract more C5 products from existing production systems, and shutting down older units will result in the loss of part of the C5 feedstock supply.