The Asian petrochemical market is under immense pressure due to China's oversupply and the uncertainty of US trade policies under Donald Trump's administration. However, amidst these challenges, opportunities emerge for countries like India, while China aggressively strategizes to turn its surplus capacity into an economic weapon. How are these dynamics shaping the regional market?

Pressure from Oversupply and US Tariffs

Sentiment in the Asian petrochemical market, particularly in Southeast Asia, remains cautious. While prices for some products have increased due to tight supply, this is not enough to offset the impact of China's overproduction. After weaker-than-expected post-Lunar New Year demand (January 28–February 4), Chinese exports flooded Southeast Asia and Europe. Polypropylene (PP) from China, for instance, has been pouring into Vietnam, putting pressure on local prices. "Chinese producers are willing to cut margins for market share," said an analyst in Jakarta, warning of potential anti-dumping actions from regional governments.

Meanwhile, the threat of US tariffs further exacerbates the situation. A 20% tariff on Chinese goods and planned reciprocal tariffs on South Korea (starting April 2) have unsettled market participants. South Korean benzene exports to the US plummeted by 81% in January to just 15,000 tons due to an influx of European supply. "Everyone is waiting for clarity on US tariff policies," said a trader. The shipping industry is also feeling the impact, with the US investigating Chinese shipyards that control 81% of global tanker production. Potential tariffs of up to $1.5 million per vessel could significantly increase long-distance trade costs.

However, not all market segments are struggling. Disruptions in methanol supply from Malaysia and Iran, as well as naphtha shortages due to drone strikes in Russia, have driven Indian import prices up by $60 per ton within a week. This highlights the complex pricing dynamics in a market simultaneously experiencing oversupply and localized shortages.

India Sees Opportunity

Amid the turmoil, India sees an opportunity. According to a Mint report (March 7, 2025), India is negotiating with the US for tariff concessions on petrochemical exports. "If the US provides relief, we can fill the gap left by China," said Deepak Mahurkar of PwC India. This strategy capitalizes on US tariff pressures against China, allowing India to strengthen its petrochemical value chain in the global market. Unlike Southeast Asia, which is burdened by cheap Chinese exports, India aims to position itself as a competitive alternative, especially in the US market, where reliance on China is increasingly unwelcome.

China: Turning Surplus into a Weapon

China, closing this narrative, is not merely enduring the situation—it is striking back. Foreign Minister Wang Yi called US tariffs "hypocritical," but a post from @ChinaEconWatch on X (March 8, 2025) offered a different perspective: "Massive exports to Southeast Asia and Europe are not just a defense—it’s a calculated pivot." The petrochemical surplus, such as caprolactam, which has weakened margins over the past six months, is now being leveraged by Beijing to dominate the market. With new capacities continuously being added, China appears ready to sacrifice short-term profits for long-term supremacy, even if it triggers further trade tensions.

A Market at a Crossroads

The Asian petrochemical market now stands at a crossroads. Southeast Asia faces pricing pressures and Ramadan uncertainty (starting March 1), causing Indonesian buyers to hesitate on April stock purchases. Meanwhile, India is preparing to seize trade opportunities, and China is transforming its surplus capacity into an expansion strategy. With local supply disruptions and looming US protectionist policies, market players can only monitor—and adapt. As one Shanghai-based producer put it, "This is no longer just about survival; it's about who can play the game smarter."

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