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Asian demand for European, US naphtha set to fall after 2014: Marubeni

Asian demand for imported naphtha from Europe and the US is likely to fall in the coming years as increased supply from the region outstrips demand growth, a senior official from Japan's Marubeni said Monday.

Asian demand for imported naphtha from Europe and the US is likely to fall in the coming years as increased supply from the region outstrips demand growth, a senior official from Japan's Marubeni said Monday.

Asia is expected to import a total of 18.1 million mt of naphtha from Europe and the US in 2014, up from 15.3 million mt in 2013, Akihiko Sagara, an executive officer with the Japanese trading company, told an industry conference in the Qatari capital Doha.

"We never imagined" that long-distance imports could rise to such a large volume, he told the 18th annual Condensate and Naphtha Forum.

Of this total, around 15 million mt is expected to come from Europe and 3.1 million mt from the US, helping to offset a decline in exports from India, Sagara said.

In the coming years, however, an additional 7.7 million mt/year of new naphtha production is expected to enter the Asian market from projects in countries including the UAE, Saudi Arabia, India, Qatar, South Korea, Brunei and Vietnam, he said.

Additional demand from new crackers and aromatics complexes is expected to amount to just under 4 million mt/year by 2019, he said.

As a result, the supply shortfall in Asia which will need to be met by imports from Europe and the US is likely to fall to 14.2 million mt, as the Middle East maintains its position as the key supply region in Asia, Sagara said.

Ethylene margins had been boosted in 2014 by "very cheap" naphtha, he said, adding that he expected naphtha crack spreads to remain weak in 2015 due to plentiful supply of the product.

"We are enjoying the petrochemical margins at the moment," he said.

Western naphtha is not the ideal specification for Asian consumers, who generally prefer lighter grades, he said. If large volumes of relatively heavy naphtha continue to flow into Asia then light naphtha "will attract a premium," he said.

Mark Quartermain, vice president of trading and supply products at Shell International Trading and Shipping Company, said he expects high refining margins in the US to result in continued production of more naphtha than the local US market wants to consume.

In addition, the prospect of more feedstock diversification in the European petrochemicals sector -- where the majority of steam crackers run on naphtha -- could also result in more naphtha being available for export, Quartermain told the conference.

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