Asian naphtha end-users conclude 2025 term contracts at slightly lower prices on bearish outlook

Asian steam cracker operators have concluded their term naphtha contracts for 2025 at similar to slightly lower differentials compared with 2024, due to persistently weak downstream petrochemical demand compounded by a supply glut downstream, according to market sources.

South Korea's YNCC awarded its January-December 2025 term naphtha contract at a premium of $1.50-$2/mt to the monthly average of Mean of Platts Japan naphtha assessments, CFR Yeosu, market sources said. This is slightly lower than the company's 2024 term contract, which was set at a premium of around $2/mt to MOPJ naphtha assessments on a CFR basis.

Singapore's PCS concluded its term negotiations for 2025-delivery cargoes at around mixed single-digit discounts to MOPJ naphtha assessments for naphtha with a minimum 75% paraffin content, with volumes similar to its 2024 contract, trade sources said. The agreed prices are in line with last year's term contract, which was awarded in the mid- to high single-digit discounts to MOPJ naphtha assessments.

In Japan, Mitsui Chemicals was also heard to have established term prices at a premium of around $1.50-$3/mt to MOPJ naphtha assessments on a CFR basis for the January-December 2025 period. However, details regarding volumes and port specifics were not known.

Taiwan's Formosa Petrochemical fixed its annual term tender for light naphtha with a minimum 70% paraffin content at a discount of $30-$35/mt to the monthly average of MOPJ naphtha assessments, CFR Mailiao. A total of 50,000 mt will be delivered monthly over January-December 2025. Industry sources said the tender was likely for a commercial tank cargo, given the large discount.

Also in Taiwan, CPC established prices for 2025-delivery cargoes at a premium of around $2/mt to MOPJ naphtha assessments, CFR Kaohsiung, for heavy full-range naphtha, with a monthly delivery volume of 75,000 mt.

Market participants remained pessimistic about the near-term naphtha market outlook as it continued to be weighed down by weak downstream petrochemical demand and lackluster olefin margins.

The petrochemicals market has faced significant challenges due to a slowing global economy, high inflation and an oversupply driven by new capacities since 2022. The lack of a strong demand recovery from China has further worsened market conditions.

As a result, companies are experiencing historically low earnings, prompting older and less efficient units to consider shutdowns and capacity rationalization.

Given the bleak recovery prospects for the downstream petrochemical market, sources had anticipated slightly lower differentials for the 2025 term tenders.

Minimal recovery was also observed in olefin margins, despite falling to their lowest levels in five years in 2023. The Platts-assessed CFR Northeast Asia ethylene spread to C+F Japan naphtha has averaged $203.97/mt year to date, up marginally from the 2023 average of $203.22/mt, according to S&P Global Commodity Insights data. This remains below the typical breakeven spread of $250/mt for integrated producers and $300-$350/mt for non-integrated producers.

Apart from the annual tenders, other end-users were also heard securing contracts for several-month periods next year.

Notably, GS Caltex procured several grades of heavy full-range naphtha, ranging from A to C, at a premium of $8-$13/mt to MOPJ naphtha assessments, CFR Yeosu. A total of 50,000 mt will be delivered monthly over January-April 2025.

Meanwhile, Korea Petrochemical Industry Co. purchased naphtha with a minimum 70% paraffin content for delivery over April-December 2025, at a premium of $2.50/mt to MOPJ naphtha assessments, CFR Onsan. Details of the volumes were not known.