ExxonMobil is set to discontinue operations at the older of its two steam crackers on Singapore’s Jurong Island starting in March, according to a Reuters report on Thursday.
This move aligns with a broader trend in the global petrochemicals sector to cut capacity in response to industry losses.
The wind-down, scheduled to begin in March and conclude by June, is a move that aligns with a broader industry trend of reducing petrochemical capacity globally due to losses.
This older plant had been in operation since 2002.
Sector challenges
The petrochemical sector is currently navigating a period of profound global distress, a reality underscored by the impending closure of ExxonMobil’s inaugural cracker facility located in a key Asian oil trading hub.
This significant move by a major industry player reflects the deep-seated challenges facing chemical producers worldwide, chief among them being the severe strain on profitability caused by widespread overcapacity.
The primary driver of this market saturation is China, which not only holds the title of the world’s largest consumer of petrochemical products—essential components in the manufacturing of diverse goods like plastics, textiles, footwear, and automotive parts—but has also aggressively expanded its domestic production capabilities.
This influx of Chinese supply has fundamentally altered the global supply-demand equilibrium, pushing down margins and making older, less efficient plants financially unviable.
The decision to shut down the ExxonMobil cracker serves as a potent barometer for the industry’s health.
Crackers are fundamental units in petrochemical production, converting naphtha or ethane into basic building blocks such as ethylene and propylene.
Their closure signals that even large, integrated companies are feeling the acute pressure from the prolonged downturn.
Depressed prices
Companies are struggling to cope with depressed selling prices for their final products, which are unable to offset the variable costs of raw materials and energy, leading to sustained operational losses.
This period of market rationalisation is expected to continue as producers globally are forced to reassess their operational footprint, prioritise newer, more cost-competitive facilities, and decommission outdated assets to bring supply back in line with demand.
The planned shutdown follows the start-up of Exxon’s new steam cracker earlier this year.
Located in Huizhou, a city in southern China, this new facility has an annual ethylene production capacity of approximately 1.6 million tonnes.
Exxon has been gradually reducing the volumes of its term contracts with Singaporean customers over the last two years, according to the Reuters report.
Traders anticipate that local buyers will probably shift to purchasing ethylene from the two remaining producers in Singapore.
Exxon also operates a second cracker with a capacity of 1.1 million tonnes per year (tpy) on Jurong Island, which began operations in 2013.
The petrochemical sector is also experiencing consolidation in South Korea, another major Asian hub.
Post closure plans
ExxonMobil is exploring the option of purchasing feedstock to sustain operations at some of its polyolefin derivative units, subsequent to the cracker’s closure.
This decision, however, will be contingent on profit margins, according to one source cited in the Reuters report,
“Unless they can secure very low olefins prices, this is unlikely to be economically viable in the long term,” said Catherine Tan, ICIS senior manager for chemical analytics.
Furthermore, Tan anticipates that the shutdown will lead to a reduction in Exxon’s naphtha imports, as naphtha is the primary feedstock for the cracker.
Exxon’s naphtha imports for the first eleven months of this year totalled about 1.5 million metric tons (13.4 million barrels), significantly lower than the nearly 2.5 million tons imported over the entirety of 2024, according to ship-tracking data from Kpler.
Despite this reduction in imports, Exxon began operations at a new refining unit at its 592,000 barrel-per-day (bpd) Singapore refinery in September.
However, the US major also announced changes to its Singapore operations, stating in October that it plans to cut 10-15% of its Singapore workforce by 2027.
Furthermore, Exxon agreed to sell its petroleum retail business in the city-state to Indonesia’s Chandra Asri, a co-owner of Aster Chemicals, which operates the Bukom refinery-petrochemical complex.
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