• Record plant closures not enough to restore normal operating rates
• China to become global leader in specialty products and net exporter of most base chemicals – its surplus is expected to set global trade flows and margins

BOSTON, Oct. 19, 2026 /PRNewswire/ — The global chemicals industry will likely require the net closure of about 7.5% of global olefin production capacity by 2030, equivalent to 35 million metric tons, to return to normal operating rates, according to new analysis from Bain & Company. Despite record plant closures, chemical plants are projected to continue running below their historical utilization average through 2030, with demand growth alone insufficient to close the gap.

In the report, Chemical Companies Don’t Have to Settle for Managed Decline, Bain finds that the industry’s downturn is not an ordinary market trough but a structural reset. Chronic overcapacity has compressed margins, while cheap feedstock has further divided the industry. China’s continued capacity additions and growing competitiveness in specialty chemicals are adding to the pressure. Meanwhile, the price rise following the Iran conflict has opened a temporary window for companies to reset their strategies, but Bain cautions that mistaking the supply shock for a recovery, risks missing that window.

“The chemicals industry’s old downturn playbook of cutting costs, protecting the balance sheet, and waiting for demand to recover, is no longer feasible. This time, demand growth alone won’t absorb the excess capacity. At the same time, the price spread between ethane-based and naphtha-based plants is becoming increasingly difficult to navigate,” said Piet de Paepe, global head of Chemicals practice at Bain & Company. “Companies need to be much more selective about where they compete, concentrating investment in products and regions where they can establish a clear advantage, rather than waiting for the next cycle to turn.”

Europe, Korea and Japan have been cutting capacity, but these closures are not enough to offset the pace of China’s capacity additions. In some products, Chinese capacity alone already matches or exceeds total world demand. Every year that closures fall short of what is required will delay margin recovery, with the gap widening as the lowest-cost producers continue to strengthen their advantage.

Gas-based plants now hold a lasting cost advantage, with US ethane expected to remain roughly $300 to $400 per ton below the price of Asian naphtha. More than half of the cracker fleets in Europe, Eastern Asia and Southern Asia depend on naphtha, making them particularly exposed. The US and Middle East are best positioned to benefit from the structural cost advantage of ethane-based production, although their dependence on ethane also limits flexibility if supply is disrupted.

China’s growing competitiveness is also challenging Western producers in specialty chemicals, a market they have traditionally relied on for higher margins. By 2030, China’s share of the global specialty chemicals market is expected to exceed 30%, surpassing either North America or Europe.

Additionally, Chinese chemical companies no longer compete on price alone. They now spend more on chemicals R&D than their US or European peers, while improving their speed to market and customer service and forming strategic partnerships to accelerate their push into specialties. Chinese producers are also targeting higher-value specialty positions, building on their rapid expansion into products such as carbon fiber.

These shifts are reshaping the global chemicals market, with returns increasingly determined by region and policy as much as by the cost curve. By 2030, Bain projects close to 70% of ethylene capacity will be concentrated in China, the Middle East and North America. High-cost plants in Europe and Northeast Asia will continue to close. China will become a net exporter of most base chemicals, so its surplus, not Western demand, will set global trade flows and margins.

Against this backdrop, Bain argues that chemical companies need to define where they can establish a clear competitive advantage through cost or innovation, reimagine their portfolios and exit or consolidate where no credible path exists. M&A can accelerate that shift by building scale and lowering costs or strengthening positions in more attractive specialty markets.

The report also recommends companies to take a clean-slate approach to costs and geographic footprints, including their exposure to China. Decisions on closing or converting high-cost carbon-exposed assets should be made within the next 12 to 18 months, while the window to reset remains open.

Media contacts:
Ann Lee (Singapore) — ann.lee@bain.com
Gary Duncan (London) — gary.duncan@bain.com
Dan Pinkney (Boston) — dan.pinkney@bain.com

About Bain & Company

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Notes to Editors 

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SOURCE Bain & Company