Warning! 15 chemicals are included in the surplus risk list.
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When the production capacity of propylene oxide doubled in five years, the operating rate of BDO dropped to 50%, and the social inventory of PVC piled up... the Petrochemical Federation finally took action. 15 products were included in the excess risk list, and 12 were directly labeled as "high risk". This is not alarmist, but a wake-up call from the authorities to the entire industry. At the end of February, the China Petroleum and Chemical Industry Federation released a list with a long name but a burst of information.: "List of Products with Risks of Oversupply in the Petrochemical and Chemical Industry (2025 Edition)". Propylene oxide, epichlorohydrin, acrylonitrile, polyvinyl chloride, chlorinated paraffin, polysiloxane, ABS, PBAT, polyether polyol, BDO, nylon 66, vinyl acetate. These 12 were judged to be "high risk". Polypropylene, soda ash, and titanium dioxide are slightly better, but they are also "higher risks." The list is not long, but behind every name there are tens of billions of investments, the wealth and lives of dozens of companies, and the jobs of countless practitioners. Let’s look at BDO first, 1,4-butanediol. The name may sound unfamiliar, but you see the products it makes every day.: Spandex, biodegradable plastic bags, lithium battery solvents. In the past few years, when the “plastic ban” became popular, capital rushed in like a shark smelling blood. Biodegradable plastics are the future direction, and BDO is its upstream. There is nothing wrong with this logic. But the problem is, everyone thinks so. As of the end of 2025, domestic BDO production capacity has reached 6.05 million tons, while the annual output is only 2.58 million tons. However, the operating rate is over 50%, which means that one out of every two devices is basking in the sun. The average price for the whole year of 2025 is 8,046 yuan/ton, while the production cost using the acetylenic aldehyde process is 8,473 yuan/ton. We lose one ton for every ton we sell, and we struggle below the cost line throughout the year.
The industry calls this "loss upon production". But the question is, why do you still invest when you know you will lose money? Look at ABS again. Acrylonitrile-butadiene-styrene terpolymer, which sounds hard to pronounce, is actually the plastic used in your TV casing, air conditioner casing, and car interiors. In the past, this was a "high-end material" with a high technical threshold, and the country had long relied on imports. In recent years, there has been a breakthrough in localization, giants have entered the market, and production capacity has skyrocketed like a rocket. The result? From "stuck neck" to "cabbage price", from "import substitution" to "stock fight". And polyvinyl chloride. By the end of 2025, PVC production capacity has reached 29.62 million tons, a record high. Social inventory is 1.1441 million tons, a year-on-year increase of 48.60%. The real estate industry is in a downward cycle, the demand for building materials is weak, and production capacity is still increasing. What is this if it is not self-inflicted? Propylene oxide is more typical, with a five-year compound growth rate of 19% in production capacity, while the demand growth rate is only 10%. The production capacity will be 8.66 million tons in 2025 and is expected to reach 10.4 million tons in 2026. The production capacity expansion of downstream polyether polyols cannot keep up with the pace of upstream. In this list, there are three products classified as "higher risk"”: Polypropylene, soda ash, titanium dioxide. They are a little luckier than the previous 12. At least they still have profits and are still in a tight balance. But luck is also temporary. Soda ash, the food of the glass industry, and photovoltaic glass have indeed given it new demand, but the amount of new production capacity is too scary - the total soda ash production capacity is expected to exceed 48 million tons in 2026, a year-on-year increase of about 12%. Once photovoltaic growth slows down, where will the extra million tons of production capacity go? Titanium dioxide, the "industrial MSG" of coatings, the completed real estate area has declined, domestic demand is under pressure, and it is all supported by exports. But how long can exports last? No one can tell.
Polypropylene is more subtle, a workhorse of plastic packaging and auto parts, and sounds just in need. However, refining and chemical integration projects have been put into operation one after another, and the supply elasticity of general-purpose PP is much greater than the demand elasticity. Once the growth of downstream home appliances and automobiles slows down, inventories will immediately explode. Why does overcapacity occur? The official attribution is very straightforward: First, production expansion is overheated and low-level duplication of construction is prominent. ； Second, downstream demand has slowed down significantly. In other words, when the market was good in the past few years, everyone was chasing the trend. For degradable plastics, use BDO, for silicones, polysiloxane, and for new energy, use upstream materials. As a result, the wind outlet did not stop, but there were so many people chasing the outlet that they were crowded to death. What's more troublesome is that the production time of these projects is highly concentrated. The planning was done three years ago, the approval was passed two years ago, and the piling started a year ago. Now that the device is built, I find that the market is no longer the same market as it was three years ago. Petrochemical Federation puts it mildly: “The production capacity under construction is planned to be released intensively, and the future demand growth rate will be far less than the supply growth rate. ” This is far behind. This is a wild horse that has escaped the reins and cannot catch up. There is another detail worthy of careful consideration: The conclusions of this list have been adopted by the Ministry of Industry and Information Technology for reference in industry management work. what does that mean? This means that this is not a simple industry study, it is a policy vane. The subsequent project approvals, production capacity replacement, and credit support will all show red lights to these 15 products. Want to work on a new project? First check to see if you are on the surplus list. Want to invest more in the products on your list? First think about how the policy will hinder you. As early as the Petrochemical Industry Development Conference in April 2025, Sun Weishan, vice president of the Federation, made clear suggestions: We should invest prudently in high-risk petrochemical chemical products such as propylene, propylene oxide, and polyvinyl chloride, improve the technological advancement, safety, and environmental protection of new projects, conduct in-depth analysis of downstream product chains and target markets, scientifically evaluate the comprehensive competitiveness of projects, and avoid low-level duplication of construction.
This list, like a mirror, reflects the current embarrassment of the petrochemical industry. On the one hand, we are the world's largest chemical country, with production capacity and output firmly ranking first in the world. On the other hand, there is a serious surplus of bulk basic chemicals and general materials, but high-end products still rely on imports. “These eight words, "low-end surplus and high-end shortage", have been mentioned for many years and written into many documents, but once it is implemented in investment decisions, I still can't help but squeeze into the familiar track. BDO's operating rate is only 50%, but new projects are still being built. The inventory of PVC is piled up, but new equipment is still being invested. The price of propylene oxide has fallen below the cost line, but production capacity is still rising. This is the real price of "involution". It is not involving others to death but oneself. The Petrochemical Federation’s list is both an early warning and a brake. It tells the whole industry: There are some roads that you really can’t walk on anymore. But the problem is, when the brakes are applied, whether the car can stop depends on the driver's determination. The most terrifying thing about overcapacity is not the production capacity itself, but the inertia of continuing to invest even though there is excess capacity.
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