China's appetite for imported naphtha has grown since the start of the year on the back of strong demand from petrochemical producers, market sources and traders said this week
Imports of the petrochemical feedstock over January-April rose 129% year on year to 1.65 million mt, with inflows in April alone climbing 255% year on year to 443,064 mt, data released Saturday by the General Administration of Customs showed.
China typically imports heavy naphtha which is the main feedstock for producing aromatics like benzene, toluene and mixed xylenes.
As such, sources attributed the higher imports to the start-up of a new aromatics plant by Zhejiang-based Zhongjin Petrochemical in June, and to strong ethylene production margins.
The Asian ethylene-naphtha spread hit $876.63/mt on April 22 this year, the highest level since September 15, 2006 when the spread was at $883.50/mt, Platts data showed.
Tight supply amid steam cracker turnaround season drove up the Asian ethylene market for the first four months of the year, said sources.
The breakeven level for producing ethylene from naphtha is $350/mt.
Naphtha was used for 60% of domestic ethylene output in 2014, according to the annual report of China National Petroleum Corp.'s Economics & Technology Research Institute.
Domestic production falls
Domestic naphtha production fell 8.4% year on year during January-April 2015 to 9.19 million mt, as refiners maximized gasoline yield amid improving demand in the local market, according to NBS data.
In China, state-owned refineries produce open spec naphtha mainly for captive use in their downstream petrochemical plants, while naphtha produced by teapot refineries is hydrotreated and used for blending gasoline, market sources said.
PetroChina's 20.5 million mt/year Dalian refinery in northeastern Liaoning province is one of the few refineries that supply open spec naphtha to other petrochemical producers.
But the 50,000 mt/month it offers is largely sold through term deals, leaving end-users seeking spot supplies little choice other than to import.
"The increase in imports is mainly driven by demand from the petrochemicals sector, which needs naphtha as feedstock," said a market source.
PetroChina's 11 million mt/year Fushun Petrochemical refinery, also in Liaoning province, is seeking imported open spec naphtha and expects a 35,000-mt cargo to arrive by end-May, a company source said.
This would be the refinery's second imported naphtha cargo after a similar-sized Peru-origin naphtha parcel arrived on April 15 at Yingkou port.
The refinery's overall utilization has averaged 70% this year and its own production of the feedstock is insufficient for its 800,000 mt/year steam cracker, said the source.
"We'll continue to import naphtha from the international market, if margins for olefins remain good," said the source.
