Global Petrochemical industries to switch to alternate feedstock from Naphtha

Global Petrochemical industries are forced to reduce their operating rates or switch to other fuels due to the skyrocketing prices of Naphtha owing to the highly volatile trend of upstream Crude oil which is worsened by the ongoing Russia-Ukraine war. Naphtha-fed steam crackers have reduced their productions in Asia since the last quarter of 2021 and most of their production has reduced to 70% since the turmoil caused by the current geopolitical situation doesn’t seem to resolve soon. This will likely lead to production cuts further downstream.

Since the main feedstock in petrochemical crackers in the US is Ethane which is derived from Natural gas, unlike Europe and Asia where the industries rely on Naphtha derived from Crude oil, the downstream products like Polyethylene (PE) and Polypropylene (PP) in the US didn’t have to reduce production from soaring crude oil price. But in the Asian market, it was quite the opposite, PP and PE producers in North Asia have planned to shut down for a couple of months since they won’t make money due to the high feedstock prices. LG, the largest South Korean petrochemical industry has decided to reduce their production to 80% to handle the situation.

Europe is the highest consumer of downstream plastics and Europe’s petrochemical industry is highly affected by the ongoing war due to their high dependency on Crude oil from Russia. So, most of the European PE and PP manufacturers have decided to switch to Ethane in order to keep up with the end-use consumer demands. Even though the price of natural gas is high in Europe, it is comparatively cheaper and more reliable than upstream Crude oil.

According to ChemAnalyst, the state of Naphtha prices is highly dependent on its demand as Feedstock in Petrochemical Industries since the need for downstream PP and PE products are always high in the plastic and packaging sector, so now the price trend solely depends on the upstream crude oil which is greatly influenced by the ongoing war between Russia and Ukraine causing an unclear further for Naphtha prices.