U.S. ethylene companies' margins may shrink further

U.S. chemical companies are facing shrinking margins due to fluctuating oil and gas prices, while dealing with tariffs and economic uncertainty, the Global Energy & Chemicals Industry Market Information Service said recently.

The key driver of higher gas prices in the U.S. is the surge in demand for liquefied natural gas (LNG) in Europe and the Asia-Pacific region, according to analyst Koze Olko. U.S. gas supplies are likely to tighten further due to strong growth in data center power generation demand. In contrast, oil prices may fall as demand for oil is expected to decline due to accelerating supply growth from non-OPEC producers such as the United States, Brazil and Guyana, the rapid spread of electric vehicles and slowing economic growth.

It is estimated that the average price of Brent crude oil will fall by 6.7% in 2025 and another 7.4% in 2026; the average price of WTI will fall by 6.7% in 2025 and another 7.9% in 2026. The cost of U.S. chemical feedstocks, particularly ethane, fluctuates as gas prices rise and fall. It is estimated that the average price of natural gas in the U.S. will rise 66.8% in 2025 and another 3.9% in 2026. Both trends will inevitably squeeze the margins of U.S. ethylene producers.

Yet, demand for ethylene is falling. Tariffs have increased the cost of importing raw materials used to make catalysts and plastic additives, and the European Union and Canada may impose retaliatory tariffs on U.S. polyethylene exports. Huntsman Group CEO Jon Huntsman, a U.S. chemical producer, expects that the rebound in the U.S. real estate market may be delayed due to tariffs and mortgage rate uncertainty, and that demand for ethylene in the construction industry will continue to be weak, further exacerbating the instability in the ethylene market.