Technavio Announces Top Three Trends for the Global Naphtha Market Through 2020
June 2, 2016 | By Business Wire News
Technavio’s latest global naphtha marketreport highlights three key emerging trends predicted to impact market growth through 2020. Technavio defines an emerging trend as something that has potential for significant impact on the market and contributes to its growth or decline.
“One of the most important uses of naphtha is in the blending of gasoline. Olefin rich naphtha through various reforming processes is used for blending gasoline-grade fuel which forms the base of the global energy demand. Naphtha produced in the US is almost entirely used in the gasoline blending process, and this is distributed to satisfy the huge local appetite for gasoline. It is also used to cater the growing demand from other countries in the Americas like Canada and Latin-American nations as well,” said Sayani Roy, one of Technavio’s lead industry analysts for oil and gas.
Technavio’s market research study identifies the following three emerging trends expected to propel the global naphtha market:
- Spotlight on Asian economies
- End of an era of cheap gas in the Middle East
- Impact of global exchange rates
Spotlight on Asian economies
Significant developments in the naphtha market are expected to come from APAC, which is home to key rising economies like China and India. It also houses some key naphtha consumers such as South Korea, Taiwan, and Japan who exhibit a significant portion of their infrastructure growth based on naphtha.
Although China has been at the forefront of naphtha consumption in the past decade owing to the huge production of petrochemicals, other Asian countries like India, Korea and Japan are not far behind. However, the recent economic slowdown in China now puts the spotlight on India.
End of an era of cheap gas in the Middle East
A majority of Middle East petrochemical producers are experiencing a shift in technology based on naphtha. Manufacturers have to make a few changes to the basic operating fundamentals that were employed over the decade. The major factor influencing this shift to alternative feedstock is the adjustment to squeeze profit margins, as the cost of production of ethylene from naphtha is higher. In the absence of cheap local gas, if the Middle Eastern governments do not provide for subsidies in naphtha for these companies, it is likely to affect their overall profitability in the business considering they would be pitted against the Chinese producers who operate on the same technology but have the advantage of being closer to Asian markets.
Current oversupply in the market
Bolstered by low global crude prices, refineries around the world are processing crude at a rate rarely seen before. Since almost 15% to 30% of crude throughput results in naphtha production, the naphtha volumes produced in the current market is staggering.
This glut in supply has not been aptly complimented by the demand side. Uncertainty in the global economic outlook, fueled by economic slowdown in the US and China have kept consumption at nominal levels. This has led to an oversupply in the market, which is a trend that is continuing since 2012. It is also estimated that from 2017 the market will witness an increase in the glut with the global oversupply expected to reach almost 2.5 MMTPA.
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