Naphtha Market Dynamics Report – Recent Commodity Market Intelligence

I. Price Trends
- Domestic Benchmark Price: As of April 15, 2025, the Echemnet (Shengyishe) naphtha benchmark price stood at RMB 7,721.50 per metric ton, down 1.44% from the beginning of the month and declining by 0.52% on a daily basis—reaching a one-year low.
- Regional Quotations: As of April 14, 2026, hydrotreated naphtha prices in Shandong Province ranged from RMB 7,400 to 7,900 per metric ton; Qingdao Xinhai Petrochemical quoted RMB 7,400/ton, while Shandong Hongyang Chemical quoted RMB 7,900/ton. In Wuhan City, Hubei Province, Hengjiu Chemical quoted RMB 7,900/ton.
- International Market: As of March 31, 2026, the Asia naphtha crack spread versus Brent crude surged to a record high of USD 466.85 per metric ton—an increase of over 300% compared to pre-conflict levels.

II. Supply-Demand Landscape
- Supply Side:
- Domestic Production: China’s national naphtha output in 2025 totaled 81.342 million metric tons, down 0.5% year-on-year. Shandong Province produced 27.704 million metric tons, accounting for 34.06% of the national total—the highest among all provinces.
- Import Dependence: In 2025, China imported 16.8 million metric tons of naphtha, up 38.28% year-on-year. Imports peaked in November at 1.7203 million metric tons, primarily driven by expanded ethylene cracker capacity downstream.
- Geopolitical Disruption: The blockade of the Strait of Hormuz disrupted Middle East–to–Europe naphtha trade. Asian buyers shifted procurement toward Russian Far East (accounting for ~24% of regional supply) and the U.S. Gulf Coast; however, logistical constraints have prevented full mitigation of the resulting supply shortfall.
- Demand Side:
- Asian Demand: China, South Korea, and India collectively account for 70% of global naphtha trade volume. In 2025, South Korea’s ethylene plant operating rates dropped from 80% to 67% due to feedstock shortages. Japan’s Idemitsu Kosan and Mitsui Chemicals consolidated their Chiba ethylene capacity to 550,000 tons/year.
- European Demand: Impacted by carbon neutrality policies and widespread refinery shutdowns, traditional petroleum-based naphtha demand in Europe is projected to decline at an average annual rate of 1.2% in 2026. The EU Carbon Border Adjustment Mechanism (CBAM) adds approximately USD 25 per metric ton to production costs.
- U.S. Demand: The substitution effect of shale gas ethane has plateaued; with new petrochemical projects coming online along the U.S. Gulf Coast, naphtha demand growth has rebounded to 1.8% year-on-year, while demand for high-octane gasoline blending remains stable.

III. Key Market Drivers
- Geopolitics: Disruptions to shipping lanes through the Strait of Hormuz and the Red Sea have dramatically increased maritime transportation costs. LR-class tanker daily charter rates have surged, and war-risk insurance premiums have risen more than fivefold. Extended voyage distances have raised landed costs in Asia by 30–40%.
- Capacity Adjustments: In August 2025, the South Korean government unveiled a petrochemical industry restructuring plan targeting a reduction of 2.7–3.7 million metric tons/year of ethylene capacity across integrated complexes in Ulsan, Daejeon (Dae-san), and Yeosu.
- Alternative Feedstocks: Petrochemical enterprises in East China have significantly increased LPG procurement. Meanwhile, several propane dehydrogenation (PDH) units across Southeast Asia have been forced offline due to naphtha shortages.

IV. Analysis & Assessment
- Short-Term Volatility: Geopolitical conflict has tightened naphtha supply in Asia, sustaining elevated prices supported by freight and insurance costs. The distorted crack spread reflects a structural decoupling between naphtha feedstock cost and crude oil pricing.
- Regional Divergence: Asian demand remains relatively resilient, though adjusting import sourcing will require time; Europe faces physical supply disruption risks and is turning to shorter-haul alternatives from West and North Africa; U.S. demand is recovering modestly, with optimized transatlantic trade flows.
- Downstream Pressure Across the Value Chain: Ethylene margins are being eroded by surging feedstock costs, prompting load reductions at multiple cracking units across South Korea, Japan, and Southeast Asia—resulting in passive global chemical capacity contraction.

V. Forward Outlook
- Price Trend: Should the Strait of Hormuz and Red Sea remain blocked, naphtha trade will bear persistently high war-related surcharges, shifting the global cost base upward systemically. Asian naphtha prices are likely to remain range-bound at elevated levels.
- Supply Restructuring: Asia will accelerate its “de-Middle East-ization” strategy, increasing reliance on U.S. LPG and Russian naphtha. Incremental supply from Bahrain’s Sitra Refinery—following its recent upgrade—may partially alleviate market tightness.
- Inventory Strategy: Downstream buyers are adopting strategic stockpiling; floating storage demand is rising at key hubs including Singapore and Rotterdam to hedge against shipping disruptions.
- Capacity Cycle: The global petrochemical industry is entering an optimization and adjustment phase: inefficient assets are being phased out rapidly, while high-efficiency, low-carbon projects are becoming the new standard—leading to a gradual slowdown in naphtha demand growth.