Naphtha prices for 2025 contracts have dropped slightly due to weak demand in the petrochemical industry and a supply glut. Several Asian companies, including South Korea’s YNCC, Singapore’s PCS, and Taiwan’s Formosa Petrochemical, have signed contracts for naphtha at lower premiums compared to 2024 prices. This marks a shift in the market as companies are now more cautious due to challenges faced in the downstream petrochemical sector.
In South Korea, YNCC awarded its 2025 naphtha contract with a premium of just $1.50-$2 per metric ton over the average monthly prices for naphtha in Japan. This is a slight decrease compared to their 2024 contract, which had a premium of around $2. The drop reflects ongoing concerns about demand in the petrochemical market, where weak olefin margins and low product prices are a struggle for producers.
Singapore’s PCS also concluded their 2025 contracts for naphtha with a small discount, around single-digit percentages, compared to last year’s prices. Similarly, Formosa Petrochemical in Taiwan secured a large discount of $30-$35 per metric ton for their naphtha, reflecting how much prices have been impacted by oversupply.
The decline in demand from the petrochemical industry is a major factor behind these price drops. The global economy has been facing a slowdown, and despite new capacities in the market, the demand recovery from key regions like China has not been strong enough to boost prices. As a result, naphtha producers are left with excess supply, leading to lower prices.
While weak demand continues to drive prices lower, there was minimal recovery observed in olefin margins, which remain below breakeven levels. The price spread for ethylene in Northeast Asia to Japan naphtha has only increased slightly, remaining well below the typical breakeven spread of $250 per metric ton for integrated producers.
Apart from the annual tenders, some companies are also securing contracts for several months. Notably, GS Caltex procured several grades of heavy full-range naphtha, with premiums of $8-$13 per metric ton, while Korea Petrochemical Industry Co. purchased naphtha with a 70% paraffin content at a premium of $2.50 per metric ton for delivery later in the year.
As the market faces weak demand and low margins, companies are hopeful for a recovery, though the near-term outlook remains uncertain.
