Global naphtha markets will likely suffer from lower profit margins in 2024 as refining and petrochemical capacity expansions in China and the Middle East outpace plastics demand growth globally, traders and analysts said, as per Hydrocarbonprocessing.
This will force cracker operators to keep run rates low, while more naphtha could go into the global gasoline blending pool especially during the U.S. summer driving season and cap retail fuel prices. Naphtha is used as a key ingredient in making petrochemicals like paints, plastics, and fibers, as well as a gasoline blendstock.
Supply growth in global naphtha markets is set to outpace demand growth by 1.88 million barrels per day (bpd) in 2024, up from 1.83 million bpd in 2023 and 460,000 bpd in 2022, according to forecasts from Energy Aspects. Wood Mackenzie expects the global naphtha surplus to hold steady at 400,000 bpd this year.
The Asia-Pacific region is still expected to remain short of naphtha, but the deficit is set to shrink by about 17% to 1.037 million bpd, S&P Global Commodity Insights said. In the Middle East, the Al Zour refinery in Kuwait and the Duqm plant in Oman, which started operations last year, are expected to ramp up production and boost naphtha exports to Europe and Asia in 2024.
Margins for key plastic raw materials such as polyethylene and polypropylene have underperformed in recent years, at around $150 per metric ton in the second half of 2023, below the break-even margin of about $300-$350 per ton needed for standalone plants, industry officials said.
S&P Commodity Insights' Sanjay Sharma said there will be some rationalization of petrochemical plants in South Korea, Japan and China the next two to three years if demand doesn't recover.
We remind, Petrobras, opens new tab said on Wednesday that it plans to finish expansion works on Train One of its Abreu e Lima refinery in the first quarter of 2025, nearly a decade after the expansion was halted due to a massive corruption scandal. Work at the second train of the refinery, located in Pernambuco state, is scheduled to start in the second half of this year and conclude in 2028, said Marina Cavassin, executive manager of production development projects at Petrobras, during a press conference.
mrchub.com