INEOS shutdown + rising oil prices: A new landscape for ethylene oxide supply.

Since the second half of 2026, the global ethylene oxide market has been undergoing structural changes due to the combined effects of rising energy costs and a sharp decline in core production capacity. The continued rise in international oil prices has driven up raw material costs throughout the entire industry chain. Coupled with the unexpected shutdown of INEOS’s 420,000-ton-per-year ethylene oxide plant in Bayport, Texas, the already weak global ethylene oxide supply and demand relationship has been rapidly disrupted. This change is spreading from North American production areas to other parts of the world, directly impacting the purchasing decisions of multiple downstream industries, including fine chemicals, semiconductor materials, new energy additives, and consumer chemicals.

I. The actual impact of core competency events

The impact of INEOS’s production halt is not a reduction in the supply of a single product, but rather a coordinated reduction in production across the entire ethylene oxide supply chain.

• The 420,000-ton-per-year ethylene oxide plant in Bayport unexpectedly shut down on October 16, 2026. Based on a global nominal capacity of approximately 28 million tons per year, this plant accounts for about 1.5%; however, if measured using a lower “effective capacity” approach that excludes long-term idle and structural shutdowns, its actual supply weight would be higher than 1.5% (approximately 3.2% according to our internal effective capacity calculations). This plant is a significant source of commercial-grade ethylene oxide in North America.
• The closure of the plant also led to a reduction in production at other plants within the same area, which have an annual output of 375,000 tons of ethylene glycol and 165,000 tons of ethylene glycol ether, thus widening the supply gap in the upstream and downstream of the industrial chain.
• Prior to the shutdown of INEOS’s plant, market discussions among producers indicated an anticipated surplus of 38,000 to 48,000 tons of ethylene glycol supply during November and December. The shutdown largely absorbed this anticipated surplus, causing the short-term supply and demand situation in the North American spot market to shift from “loose” to “tight” within just a few days. After the shutdown, the previous surplus supply was largely made up, and the supply in the North American spot market tightened rapidly.

Global ethylene oxide production capacity is highly concentrated. According to our internal capacity model (based on consolidated and equity capacity, which differs from rankings of individual entities reported by publicly available third parties), the top ten producers account for 42.1% of global capacity. Saudi Aramco accounts for approximately 8.9% on a consolidated basis, with Sinopec and Shell ranking second and third, respectively. It should be noted that leading producers listed as individual entities in publicly available market reports are often Dow, Sharq, Formosa, etc. The ranking differences mainly stem from different statistical methods and do not alter the structural characteristic of highly concentrated global capacity. Among these top ten producers, INEOS operates the Bepport complex, located at the epicenter of the current production disruption—a structural feature that amplifies the impact of a single plant shutdown on the market. Under this supply structure, unplanned shutdowns of a single major plant can easily be transmitted to downstream regions through global distribution and trading networks, thereby exacerbating market expectations of a supply gap.

Second, strong support from energy costs continues to strengthen.

The current rise in ethylene oxide prices is not a short-term fluctuation caused by a single event. The persistently high price of upstream crude oil has led to increased costs, which forms the fundamental support for this round of price increases.

• Ethylene is the core raw material for the production of ethylene oxide, and its price has risen in tandem with crude oil prices globally. Among these, the production cost of ethylene production routes based on naphtha has seen the largest increase.
• Geopolitical conflicts have led to increased shipping route risk premiums, further increasing the cost of transporting raw materials and finished products across regions and significantly reducing the economic viability of long-distance transportation.
• While some producers using light hydrocarbon feedstocks maintain a certain cost advantage, this cannot offset the overall upward trend in costs across the industry. The production cost floor for ethylene oxide has been continuously rising, with no signs of a rapid decline in the short term.

III. Changes in the Global Procurement Structure

The rapid changes in the supply chain landscape are fundamentally altering the purchasing habits of downstream industries that have developed over the past few years, with adjustments occurring globally in three directions:

• The procurement process has been fully moved upstream, and most downstream companies no longer wait for traditional seasonal price troughs to replenish their inventory. Instead, they choose to lock in medium- and long-term orders when prices gradually stabilize, thereby protecting costs through long-term contracts and preventing production disruptions caused by further increases in spot prices.
• Supply sources have shifted from a single region to a diversified, multi-regional distribution. Procurement teams have begun to reassess the delivery stability, logistical radius, and resilience of suppliers in different regions, thereby reducing over-reliance on a single production location and mitigating the impact of single-point shutdowns on their supply chains.
• The procurement evaluation criteria have shifted from a single price-oriented approach to a supply chain security-oriented approach. Downstream users no longer merely pursue lower prices for individual purchases, but instead incorporate supply continuity, quality stability, and emergency response speed into their core evaluation dimensions to avoid production losses due to supply disruptions far exceeding raw material price differences.

IV. Market Trend Analysis

Over the next 6-12 months, the global ethylene oxide market will generally enter a period of high volatility. The momentum of sharp price increases will gradually weaken, but it is unlikely to return to the previous low operating range.

• Upstream crude oil prices will continue to fluctuate wildly until geopolitical conflicts are fully resolved. The supporting role of raw material costs will not diminish quickly, and the lower limit of ethylene oxide production costs will remain high.
• The reopening date for INEOS’s Bayport factory has not yet been officially announced, and the uncertainty surrounding the resumption of production will continue to affect short-term market sentiment. Given the current global supply shortage, only the official resumption of production at this factory can significantly alleviate the supply constraints.
• Demand for downstream semiconductor solvents, new energy materials, and medical disinfection consumables will remain stable. However, the release of new production capacity in some regions is slower than expected, which means that the supply-demand rebalancing process will take longer than the industry generally anticipates.

Overall, the global ethylene oxide market has moved away from the loose supply environment of the past few years, and buyers need to develop more flexible supply chain strategies to adapt to the intense supply and demand game that will continue for a long time.