Oil-based raw materials put Southeast Asian chemical makers at a cost disadvantage
Bain says the region relies heavily on naphtha, an oil-derived feedstock, while competitors can use cheaper ethane.
Southeast Asian chemical makers rely on naphtha, a raw material derived from crude oil, for 54% of their feedstock mix, according to Bain & Company. That leaves the region at a cost disadvantage against competitors using cheaper ethane, the consultancy says in analysis published on 19 October.
Feedstock is the raw material used to make chemicals. Bain expects US ethane to remain roughly US$300–400 per tonne cheaper than Asian naphtha. The projected difference is between raw-material prices, rather than a measure of every plant’s production costs. Naphtha accounts for 10% of North America’s feedstock mix and 14% of the Middle East’s, compared with Southeast Asia’s 54%.
But the cheaper input does not produce the same mix of chemicals. Plants called steam crackers break down feedstocks into building blocks used in products including plastics. The US Energy Information Administration explains that ethane yields a high share of ethylene, while naphtha also produces valuable chemicals such as propylene, butadiene and benzene. Revenue from those other products therefore matters when comparing the two inputs.
A switch also depends on the equipment already installed. Technology supplier Linde describes cracking and separation systems tailored to particular feedstocks and products, alongside upgrades for changing feedstock. Buying cheaper ethane is therefore only part of the calculation for an existing naphtha plant: its processing system and the products it can sell also matter.
The cost gap comes alongside excess global supply. Bain estimates that net closures equivalent to about 7.5% of global olefin production capacity, or 35 million tonnes, would be needed by 2030 to restore normal operating rates. Olefins include ethylene and propylene. That figure is a projected closure requirement, not a list of announced shutdowns.
Capacity cuts in Europe, Korea and Japan remain insufficient to offset additions in China, Bain says.
Sources: Bain analysis, 19 October 2026; EIA feedstock background (2015); EIA product-yield background (2022); Linde steam-cracking technology.
