The additional domestic polyethylene production capacity in 2026 is expected to range from 6.15 million to 7.29 million tons

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By 2026, China’s polyethylene industry will reach a significant milestone in its development, with the total production capacity exceeding 45 million tons per year for the first time. Reporters have learned from industry analysis firms and relevant companies that, due to various factors such as the simultaneous release of new production capacity and insufficient demand from downstream sectors, the supply and demand dynamics in China’s polyethylene market will continue to undergo significant changes. Competition in this sector is becoming more rational, and companies are facing new challenges in their operations. The industry generally believes that China’s polyethylene sector is steadily shifting from competition based on scale expansion to competition focused on value enhancement, with structural adjustment having become the main trend in its development. Capacity continues to expand, with an increasing trend toward structural differentiation. According to industry estimates, China’s new polyethylene production capacity is expected to range between 6.15 million and 7.29 million tons by 2026, with a growth rate of 15% to 18.5%. In terms of the pace of production deployment, there is a clear pattern of lower levels in the first half and higher levels in the second half; new production capacity was limited in the first half, while market supply will gradually increase as various production facilities come online in the second half. In terms of raw material sources, the new production capacity comes mainly from oil-based facilities; large refining and chemical companies such as Huajin APM and Sinopec Guulai are the main contributors. At the same time, coal-based polyethylene plants are also entering a period of increased operation. Among them, the 500,000-ton polyethylene production facility at BASF’s Zhanjiang integrated complex was successfully put into operation in January 2026, thereby becoming the first to utilize the newly added production capacity ； China National Petroleum Corporation’s 1.2 million-ton per year second-phase ethylene project at the Dushanzi Petrochemical and Tarim facilities will be fully completed this year. This project includes two 450,000-ton per year full-density polyethylene production units and one 300,000-ton per year low-density polyethylene production unit; once operational, it will further strengthen China’s domestic supply system. It is worth noting that the global additional production capacity for polyethylene in 2026 is expected to reach 14.7 million tons, with China accounting for more than half of this amount, which underscores China’s important role in the global polyethylene industry. The trend toward optimizing product structure is particularly evident. Relevant data show that the planned production volume for full-density polyethylene plants in 2026 will reach 2.75 million tons, accounting for the largest share of the new capacity added ； The HDPE plant is scheduled to start production at 2.05 million tons, right after that. In contrast, the rollout of linear low-density polyethylene (LLDPE) has slowed down significantly, with some new plants focusing on producing differentiated products such as metallocene LLDPE. Estimates suggest that the growth rate of effective LLDPE production capacity in 2026 will be only around 4%, which is far lower than the 24% growth rate seen in 2025. Furthermore, the production capacity of low-density polyethylene (LDPE) and LDPE/EVA plants will continue to increase starting from 2025. Coupled with breakthroughs in the industrialization of high-end products such as ultra-high molecular weight polyethylene and POE, the path toward a more advanced and differentiated development of this industry is becoming increasingly clear. Relevant analysts say that the supply and demand dynamics in the polyethylene industry will continue to evolve in 2026, characterized overall by a pursuit of balance at various stages and rapid price fluctuations. “In the first half of the year, the release of newly added production capacity was limited; coupled with a decrease in import supplies, the market foundation remained relatively stable ； In the second half of the year, as capacity expansion is gradually implemented, the market will operate under pressure; prices may give back some of their gains and continue to decline. ”Diverging cost trends widen profit gaps among enterprises. By 2026, there will be a significant variation in the costs of polyethylene in China, and the profit gap between companies using different production methods will further increase, with the pace of industry restructuring likely to accelerate. As the dominant manufacturing process in the industry, oil-based polyethylene accounts for nearly two-thirds of the total domestic production capacity, and its profitability is closely linked to international crude oil prices. The industry expects that international crude oil prices will remain high and fluctuate in 2026; coupled with downward pressure on polyethylene spot prices, the profit margins of companies that produce polyethylene from oil will be under some strain. Relevant analysts point out that large integrated refining and chemical companies are able to maintain a certain level of profitability thanks to their scale advantages and high degree of raw material self-sufficiency, whereas smaller oil processing facilities face severe pressure to either be phased out or undergo transformation and upgrading. Coal-based polyethylene accounts for nearly 20% of the industry’s total production capacity, and its cost is directly linked to coal prices. Thanks to the positive factor of a moderate decline in coal prices expected by 2026, the cost advantage of coal-based polyethylene will gradually become apparent, and profit levels are likely to remain stable. Such production capacity is primarily concentrated in coal-rich regions such as Shaanxi and Inner Mongolia; thanks to the local resource endowments and relevant policy support, these enterprises have a solid foundation for development. Although the light hydrocarbons processing route is highly favored in the market due to its advantages such as high yield, low cost, and low carbon emissions, it has the drawback of being highly dependent on imported raw materials. Data shows that China’s reliance on imported ethane for producing polyethylene from light hydrocarbons is expected to exceed 95%, with a highly concentrated source – almost all of it coming from the United States. Market participants say that in 2026, the global supply of ethane is expected to be tight. Demand in Asia continues to rise; however, the U.S.’s export capacity for ethane remains limited. Meanwhile, trade tensions and geopolitical risks could drive up import costs. As a result, domestic polyethylene producers utilizing light hydrocarbons as raw materials will face significantly increased cost pressures, with their profit margins continuing to shrink. Some companies may opt to operate at reduced capacity levels to alleviate this pressure. Domestic demand is recovering steadily, presenting both opportunities and challenges. In terms of demand, the apparent consumption of polyethylene in China is expected to reach around 41.5 million tons by 2026, representing a year-on-year increase of 7.8%. Although there is a steady recovery, this growth rate remains lower than that of production capacity, so the pressure of supply-demand imbalance will continue to exist. Traditional demand sectors performed modestly, with areas such as packaging film, agricultural film, and pipes experiencing slow growth, while external demand faced significant pressure. Professional agencies predict that in 2026, the operation rates in the aforementioned sectors will generally range between 30% and 55%, with limited increases in orders and seasonal fluctuations becoming more stable. Meanwhile, increasing barriers to global trade further suppress traditional demand, and trade measures such as the EU’s Carbon Border Adjustment Mechanism continue to put pressure on China’s exports of plastic products, indirectly affecting the expansion of demand for polyethylene in its traditional downstream applications. “The accelerating demand from emerging industries has become a new driving force for polyethylene demand. ”Wang Chunming, general manager of Shandong Ruiyang Chemical Co., Ltd., said that the demand for specialized materials such as photovoltaic backsheet films and lithium battery separators continues to grow. POE products required in the photovoltaic sector have now been manufactured industrially in China, which helps reduce reliance on imports. However, emerging sectors still account for a small proportion of total consumption, and thus it is difficult for them to fully offset the impact of weak demand in traditional sectors. In addition, the implementation of domestic policies on \"large-scale equipment renewal\" and \"trade-in of consumer goods\" has generated new momentum for industries such as home appliances, automobiles, and high-end packaging. This has led to an increase in demand for high-performance products like metallocene polyethylene and high-impact polyethylene, thereby supporting the market for premium-grade materials and driving the industry toward more refined and differentiated development. Among them, Sinopec’s linear polyethylene has entered the domestic coating market for the first time, while the special material for nuclear power pipes developed by Shanghai Petrochemical has successfully broken the import monopoly, demonstrating the achievements of domestic companies in the field of high-end products. In terms of exports, China’s polyethylene exports have enjoyed a compound growth rate of 34.5% over the past 5 years, and such steady growth is set to continue through 2026. Traders report that the proportion of China’s polyethylene exports to the Southeast Asian market continues to rise, and the export growth rate of high-end products exceeds that of general-purpose grades. “Factors such as the upgrading of infrastructure and falling sea freight costs resulting from the joint development of the Belt and Road Initiative have created favorable conditions for polyethylene exports. Meanwhile, domestic enterprises are also actively responding to adjustments in global trade policies by upgrading their products and diversifying their markets, thereby enhancing their ability to withstand risks. A thorough adjustment in the industry is expected, with corporate transformation becoming urgent. Overall, driven by factors such as increasing supply, varying costs, and rising demand, a profound adjustment in China’s polyethylene market by 2026 is an inevitable trend. Industry experts suggest that relevant companies should accelerate technological upgrades and the development of high-end products, focus on the demands in emerging fields such as new energy and advanced manufacturing, and optimize their product portfolios ； At the same time, it is necessary to strengthen collaboration within the industrial chain, enhance the ability to meet raw material needs domestically, and reduce reliance on external sources. By identifying one’s position in a fragmented market landscape, it is possible to gain a solid footing and gain an advantage in the new round of industry competition.