Sept 22 (Reuters) - China's swift production ramp-up of

ethylene, a crucial component for plastics, packaging and

construction, is expected to drive down global prices and weigh

on U.S. and European chemical manufacturers already grappling

with oversupply and weak demand.

Domestic demand in China too is faltering as property

investment weakens amid a broader economic slowdown. That could

lead to Chinese ethylene flooding global markets, delaying a

recovery in prices, analysts said.

The world's second-largest economy operates more than 54

million tonnes per year (MMtpa) of ethylene capacity and is

projected to rise about 9% of global 2024 capacity by 2030, to

beyond 75 Mtpa, according to Vertical Research Partners.

China has "been under a gun to get capacity up by 2030," Dow

CEO Jim Fitterling said at a Morgan Stanley conference this

month.

U.S. producers including Dow, Celanese and

LyondellBasell have seen profits erode as prices fall.

High production costs and aging plants are squeezing

European producers, increasing reliance on imports of primary

chemicals like ethylene and propylene.

China's decision not to cancel some major projects earlier

in the downturn has extended the slump, said Garrie Li of S&P

Global Commodity Insights.

Capacity growth is expected to outpace demand growth.

China's rapid petrochemical growth raises concerns about

global market overproduction, LyondellBasell CEO Peter Vanacker

said.

China's property sector, a heavy petrochemical consumer,

remains weak, with investment down 12% in the first seven months

of 2025.

"if demand in China falls short of the capacity build and

then China would likely export," Morningstar analyst Seth

Goldstein said, adding that it would pressure European

production and North American capacity.

China's polypropylene exports jumped from 1.3 million tonnes

in 2023 to 2.4 million in 2024, and could reach 3.2-3.4 million

tonnes by 2026, S&P data showed.

The European Chemical Industry Council, Cefic, said

China's low-cost model made it the EU27's largest chemical

supplier, with shipments worth more than 17 billion euros

($19.97 billion) in the first half of 2025.

The risk of market flooding "is real," Cefic's Sylvie

Lemoine said.