Communicator

SP Chemicals Gas Cracker. Credit: SP Chemicals.

Taixing, Jiangsu Province, China – May 2025

SP Chemicals, a leading Chinese petrochemical producer, has announced plans to significantly increase its use of ethane as feedstock at its flagship complex in eastern China, reflecting a broader industry move to cut costs and enhance competitiveness amid global oversupply and squeezed margins.

Ethane Utilization Set to Rise

Currently, SP Chemicals’ cracker in Taixing operates with ethane as about 75% of its feedstock. The company is now studying an increase to as much as 90% ethane utilization, according to CEO Chan Hian Siang. This shift is being evaluated in partnership with Technip, a global engineering firm, and would make SP Chemicals one of the most ethane-intensive operators in Asia.

Ethane, a derivative of U.S. shale gas, is typically cheaper than the more commonly used naphtha. With U.S. ethane exports projected to grow by 7% in 2025 and China recently waiving its 125% tariff on U.S. ethane imports, the economics for ethane cracking have become even more favorable. SP Chemicals sources its ethane primarily from Enterprise Products Partners, a major U.S. supplier.

Infrastructure Expansion

To support the increased ethane use, SP Chemicals will invest between 400 and 500 million yuan (approximately $56–69 million) to construct a new 200,000-cubic-meter ethane storage facility at the Taixing site, nearly doubling current storage capacity. The company also plans to build three new Very Large Ethane Carriers (VLECs) by 2028 to secure long-term supply logistics.

Industry Context

The move comes as Asian petrochemical producers face thin profit margins and global oversupply. Flexible crackers—those able to process both naphtha and ethane—are seen as best positioned to weather market volatility. Other regional players, such as South Korea’s YNCC and Thailand’s PTT Global Chemical, are also ramping up ethane use to maintain cost competitiveness.

SP Chemicals was the first in China to operate a fully gas-based ethylene cracker, starting up its 650,000 tpa (now 780,000 tpa) facility in 2019. The cracker supplies ethylene to the company’s vinyl chloride monomer (VCM) and styrene units, as well as the merchant market.

Strategic Impact

By increasing ethane utilization, SP Chemicals aims to:

• Lower feedstock costs and improve margins in a challenging market.
• Enhance operational flexibility and resilience.
• Secure long-term supply through expanded storage and shipping.

CEO Chan Hian Siang noted that “ethane remains cheaper than alternative feedstocks,” underscoring the company’s commitment to cost leadership and innovation.

Outlook

SP Chemicals’ investment in ethane infrastructure and feedstock flexibility positions it at the forefront of China’s petrochemical sector transformation. As U.S. ethane exports rise and China’s demand for cost-competitive chemicals grows, the company’s strategy is likely to set a benchmark for the region’s evolving industry landscape.

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