China's naphtha imports will reach record levels in 2025 due to new plants and US trade concerns
Analysts and traders predict that China's imports of naphtha will reach record levels in 2018. New plants and the caution about U.S. propane, ethane and ethane will support demand for this petrochemical feedstock and improve refiners' margins.
Sources said that cracker operators at the world's biggest petrochemical company, which has shifted in recent years from cheaper U.S. propane to ethane, have switched some of their demand back to naphtha, after becoming entangled in the U.S. China trade war, which disrupted the U.S. supply, they are now switching to naphtha.
Rystad Energy, FGE and other consultancies said that the need to diversify supply and meet demand for new plants would drive imports of naphtha to a record high this year. The companies expect to see 144 to 153 millions barrels (164 to 17 million metric tonnes) imported. JLC estimates 2025 imports to be around 15 million tons.
Official data revealed that China will import 12 million tonnes of goods in 2024.
"With the recent problems with ethane imports and propane, a certain level of trust has been established when it comes to U.S.-bound cargoes," stated Pankaj Srivastava. Senior vice president for commodity markets, Rystad Energy.
Naphtha is not affected by these issues because there are many suppliers.
He said that a total of 4,000,000 tons of ethylene per year (tpy), which will help import demand, is expected to be online in China before the end of 2025. This number will rise to 6,000,000 tpy during the first half of 2020.
In its July report, the International Energy Agency (IEA), said that China's demand for naphtha is expected to grow by about 6% by 2025, and by 8.6% by 2026. This is a significant increase over the growth projected of propane and ethane combined, which are only 2.3% by 2025, and 1.3% by 2026.
In June, China released a second set of 2025 import quotas totaling nearly 24 million tonnes, almost doubling the allocations for last year.
Government data shows that China imported 6 million tons (222.81%) more naphtha in January-May than it did the previous year, and at the highest level since 2015. The largest suppliers were Russia, United Arab Emirates, and South Korea.
The government's data shows that ethane imports remained flat at 2.3 millions tons during the same period. This is compared to a 6% increase in propane imports on an annual basis.
Energy Aspects stated in a note dated July 4, that China's imports of liquefied petrol gas (LPG), which includes propane, will likely remain lower in the third-quarter due to cautious purchases of U.S. cargoes.
Analysts said that the robust demand for naphtha is expected to support Asian refiners’ margins. Naphtha Margins
Srivastava, of Rystad, said that "increased pull from China" will support cracks in naphtha towards the middle to end of the third quarter.
(source: Reuters)
