Formosa's proposed petrochemical complex in Louisiana faces more bad news

The Formosa Plastics Corporation (“Formosa”), a petrochemicals corporation headquartered in Taiwan, faces market challenges to its proposed petrochemical complex in St. James Parish, Louisiana—and the conditions are getting worse. In the meantime, as explained in this report, Formosa’s own financial situation appears to be weakening. This is not a good scenario for a costly, risky petrochemical buildout. 

IEEFA’s review of the financial and market conditions relevant to the proposed petrochemical complex reveals the following:

• Formosa has experienced a significant decline in revenue since 2021, and analyst estimates for the 2025-26 period are bleak.
• Formosa’s profitability (as measured by pretax income) and stock performance have suffered over the past four years. Also, the company underperformed relative to the Taiwan Index (TAIE), S&P 500, and XLB (Materials Select Sector SPDR Fund).
• Formosa’s rising debt levels have weakened its financial standing and credit agencies have flagged concerns. In January 2025, Moody’s cut Formosa’s credit rating from A3 to Baa1, a significant change given the rating company’s previous expectations for the company’s adjusted debt/EBITDA. Standard and Poor’s in October 2023 downgraded Formosa’s overall credit assessment from stable to negative based on what it termed “weak profitability.”
• The outlook for the polyethylene (PE) sector is poor. The industry faces structural changes in the global economy that suggest a secular decline. Factors putting demand growth at risk include overcapacity in the petrochemical sector, an aging population and slower economic growth in China, slower industrial growth, and shifts toward more sustainable commodities.
• Analysts report the operating rates of ethylene production facilities globally are at historic lows due to large-scale capacity additions and weak demand growth. Even so, more capacity is set to come online in 2025.

Market conditions suggest that going forward with the proposed petrochemical complex in Louisiana would be a costly misstep, and the company would be wise to abandon the project and pursue more viable opportunities that align with market realities.