Asian naphtha prices have plummeted to a 16-month low, driven by a combination of slumping crude oil prices and weakened demand. On Monday, the benchmark Tokyo open spec contract for naphtha traded at $613 per tonne, a price level unseen since July 2023. This significant drop comes at a time when naphtha cracking facilities across Asia face looming operational suspensions due to declining profit margins.
The petrochemical industry is feeling the strain as crude oil prices continue to decrease, directly impacting naphtha prices. Naphtha, an essential precursor for plastics production, is facing reduced demand, further exacerbating the situation. Industry experts have noted that the financial viability of naphtha cracking operations is increasingly under threat, with several facilities contemplating shutdowns in response to the challenging market conditions.
In Tokyo, where the article was published by Nikkei staff writer Riona Gomi, industry insiders have expressed concerns over the future of naphtha processing in the region. The SK Energy refinery in Ulsan, South Korea, serves as a poignant example of the broader challenges faced by the sector. As one of the major facilities involved in naphtha cracking, it too is grappling with the decision to suspend operations amid diminishing profits.
The recent downturn highlights the vulnerability of the naphtha market to fluctuations in crude oil prices and shifts in demand. The current trend signifies a stark contrast to previous periods where stronger demand and higher oil prices buoyed the sector. Analysts warn that without a rebound in these key areas, the petrochemical industry may witness further contractions.