Asian demand for naphtha from Europe, USA likely to fall after 2014

Asian demand for imported naphtha from Europe and the US is likely to fall in the coming years as increased supply from the region outstrips demand growth, a senior official from Japan's Marubeni has been reported by Platts. "Asia is expected to import a total of 18.1 mln mt of naphtha from Europe and the US in 2014, up from 15.3 mln mt in 2013. We never imagined that long-distance imports could rise to such a large volume," Akihiko Sagara, said. Of this total, around 15 mln mt is expected to come from Europe and 3.1 mln mt from the US, helping to offset a decline in exports from India. In the coming years, however, an additional 7.7 mln mt/year of new naphtha production is expected to enter the Asian market from projects in countries including the UAE, Saudi Arabia, India, Qatar, South Korea, Brunei and Vietnam, he said. Additional demand from new crackers and aromatics complexes is expected to amount to just under 4 mln mt/year by 2019. As a result, the supply shortfall in Asia which will need to be met by imports from Europe and the US is likely to fall to 14.2 mln mt, as the Middle East maintains its position as the key supply region in Asia, Sagara said. Ethylene margins had been boosted in 2014 by "very cheap" naphtha, he said, adding that he expected naphtha crack spreads to remain weak in 2015 due to plentiful supply of the product. "We are enjoying the petrochemical margins at the moment. Western naphtha is not the ideal specification for Asian consumers, who generally prefer lighter grades, he said. If large volumes of relatively heavy naphtha continue to flow into Asia then light naphtha "will attract a premium," he said.
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