Demand for naphtha from China's ethylene sector will continue to grow over the next three years but its dominance in the overall feedstock mix will slip, a Sinopec official said Wednesday.
Naphtha is primarily used for ethylene production in China. "It currently accounts for 70% of the total feedstock used in ethylene plants," said Shu Zhaoxia, chief analyst for chemicals at state-owned refiner Sinopec, at a conference in Singapore.
China currently has ethylene production capacity of 15.2 million mt/year and an additional 1.93 million mt/year of capacity is slated to be ready by the end of the current five-year economic plan in 2015, Shu said.
"A number of these new plants will use mostly naphtha, but producers are also finding cheaper alternatives for feedstock," she said. These include synthetic coal gas and coal-to-liquids.
As a result, Shu expects naphtha's dominance in the overall feedstock mix to drop to around 65% by then.
"So while naphtha demand will still grow, the pace of growth will be slower than in the last few years," Shu said.
"Demand for naphtha this year has been relatively sluggish because of poor chemicals demand due to slowing economic growth in China," she added.
Ethylene consumption this year is likely to rise 3.8% to 32.5 million mt, slowing from the almost 5% growth seen last year, Shu said.
Next year production is likely to rise to 17 million mt due to new capacity coming online. Sinopec and CNPC are each planning two new ethylene plants, while a number of existing plants have been earmarked for upgrades. Shu said both Sinopec's greenfield projects in Wuhan, Hubei province and Chengdu in Sichuan province will use naphtha as feedstock. They have total capacity of 800,000 mt/year.
Naphtha output by domestic refineries over January-September fell 2.3% year on year to 20.9 million mt (686,500 b/d), according to data from the National Bureau of Statistics.
Total naphtha exports fell 53.7% year on year to 190,000 mt over January-August, the latest available data, according to the General Administration of Customs. It does not provide naphtha import data. According to Credit Suisse, apparent demand for naphtha is expected to contract 2.1% this year to 1.4 million b/d. This compares with 1.7% growth last year and 23.8% growth in 2010.
