China's Ethylene Oxide Prices Fall to 17-Year Low Amid Overcapacity and Weak Demand

Recently, domestic ethylene oxide prices have fallen to around RMB 5,800 per tonne, while the full-year 2025 average is projected at approximately RMB 6,500 per tonne — the lowest level in the past 17 years. As a flagship product of China's C2 industrial chain and a key downstream extension of ethylene, this historic price trough underscores the continued weakness of China's C2 sector.

From 2009 to 2025, China's annual ethylene oxide prices followed a prolonged downward trend, peaking in 2010 at RMB 12,000 per tonne. By 2025, prices had declined by a cumulative 46% compared with 2009, ranking ethylene oxide among the chemical products with the steepest long-term price declines in China.

Daily price data over the 2009–2025 period show pronounced volatility, with December 2025 again setting a new historical low. Previous troughs were recorded in March 2020 and June 2023, when prices fell to around RMB 5,800 per tonne. The latest break below these earlier lows points to a significantly weaker market environment than in prior cycles.

Profitability in the ethylene oxide industry is typically assessed using either ethylene-based or naphtha-based cost models, depending on industry practice. Based on market data projections using end-2025 feedstock prices as benchmarks, the results indicate persistent losses across the sector. Under the ethylene-based model, theoretical losses are estimated at 9%, while the naphtha-based model suggests losses of 36%. In 2025, relatively firm naphtha prices at the feedstock end resulted in severe ethylene profit compression, although declines in ethylene market prices partially mitigated losses for ethylene oxide producers.

Irrespective of the feedstock calculation methodology, China's theoretical ethylene oxide profit margins have been in continuous decline in recent years. Using ethylene-based calculations, profit peaks occurred between 2009 and 2010, while naphtha-based calculations indicate the highest margins in 2016. The choice of calculation point along the industrial chain materially affects margin volatility. Given that most domestic ethylene oxide production now adopts integrated processes, the naphtha-based model is generally considered more reflective of market realities.

Several factors have driven ethylene oxide prices and profitability to historic lows in 2025.

First, rapid capacity expansion has resulted in severe supply-demand imbalances. Incomplete statistics indicate that China's ethylene oxide production capacity exceeded 7.8 million tonnes by the end of 2025, representing cumulative growth of more than 23%. Major new projects, including those at Jilin Petrochemical, Yulong Petrochemical, and Zhenhai Refining & Chemical, commenced operations during the year, further exacerbating oversupply. This surge in capacity is widely viewed as a key driver behind the unprecedented price decline.

Second, the sharp contraction of China's real estate sector has led to a significant downturn in ethylene oxide demand. Excluding ethylene glycol, the largest downstream application is polycarboxylate superplasticiser polyether monomers, accounting for approximately 43% or more of total consumption, followed by non-ionic surfactants at around 35%. In 2025, weakness in the property sector sharply reduced demand across related industries. Water-reducing agent producers largely shifted to just-in-time procurement, with minimal inventory accumulation, while some downstream plants halted production due to losses. As a result, leading polycarboxylate superplasticiser monomer producers operated at less than 40% capacity utilisation during the year, severely weakening support for ethylene oxide consumption and becoming the core driver of demand contraction.

Third, rising carbon compliance costs have further compressed corporate profitability. From 2025, ethylene oxide producers are required to achieve carbon capture rates of 85%, with capture costs estimated at around RMB 150 per tonne. Most enterprises, however, purchase carbon allowances in the emissions trading market at prices exceeding RMB 90 per tonne, increasing operating costs and eroding margins.

Fourth, the surfactant sector is also undergoing rapid contraction. Weak demand in the textile and daily chemical industries has reduced consumption of non-ionic surfactants, with demand from these sectors projected to decline by 15%–18% by 2025. Given that non-ionic surfactants account for roughly 35% of ethylene oxide's downstream use, this has directly weighed on overall consumption. In addition, subdued performance in downstream sectors such as pharmaceutical intermediates and polyurethanes has further constrained demand for non-ionic surfactants, amplifying pressure on ethylene oxide demand.

Analysts note that ethylene oxide, as a representative product of China's C2 industrial chain, remains highly correlated with the real estate sector. Dragged down by property market weakness, prices have fallen below historical lows, marking a critical phase in China's industrial restructuring. The sector has entered a vicious cycle characterized by overcapacity and intense internal competition. While lower prices may offer limited short-term support to consumption, the long-term impact of the property downturn is expected to persist, making major structural adjustments across the industry inevitable.