Naphtha petchems demand under pressure

Market: LPG, Oil products
17/02/25

Petrochemical cracking demand for naphtha is under pressure in northwest Europe from two directions at once, as prices for alternative feedstock propane drop sharply and overall cracking rates suffer from weak downstream demand.

Cracking margins remain under pressure, with utilisation rates around 70pc, below the historic average of 85-90pc. Large cargo cif ARA propane has weakened against Ice Brent crude futures, falling by 5pc between October and 13 January, and dropping to 60pc of Ice Brent's value, its lowest since August. The cif northwest Europe naphtha-propane spread widened to $106.75/t on 13 February from $60.25/t on 13 January, marginally exceeding the 2024 average of $105.75/t.

The European naphtha-propane spread widened in early 2025 because propane's oversupply continued to pressure prices while gasoline blending provided seasonal support to naphtha. US LPG exports to northwest Europe reached 786,000t in January, the highest since June 2022, Kpler data show. China's propane dehydrogenation (PDH) plant utilisation rates fell to 66pc by the end of 2024 from 75pc in October, reducing demand for US LPG and redirecting supply towards Europe.

Large propane shipments into Europe have coincided with weak downstream demand for propylene and ethylene. Mounting pressure on the European petrochemical sector has led to rationalisations and shutdowns. Dow recently idled one of its three crackers at its Terneuzen facility in the Netherlands. The cracker has a nameplate ethylene capacity of 600,000 t/yr, and all three crackers at Terneuzen have up to 40pc propane feedstock flexibility.

Gasoline blending demand has supported naphtha. The Eurobob non-oxy naphtha differential reached $79.25/t on 3 February, up by $33.25/t compared with a month prior, signalling stronger blending economics, as producers prepare early for the summer driving season. The switch to summer-grade gasoline specifications is expected to drive additional demand for light naphtha and derivatives alkylate and isomerate. Stricter RVP regulations will reduce the use of cheaper butane in the blending pool. This shift is likely to support naphtha prices, directly and through increased demand for high-octane blending components.

By Jide Tijani

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