Alphatanker expects large product tankers to continue finding employment opportunities from long-haul naphtha shipping demand, with new petrochemical plants coming online in Asia amid firm production margins.
While tanker earnings have been plagued by tonnage oversupply in recent months, the AXSMarine research unit said eastbound shipments from Europe will remain a significant source of vessel demand for the long run.
“Asian petrochemical demand is expected to be one of the main engines of growth over the next decade,” Alphatanker analysts wrote in a note published on Thursday.
“This should help to support a steady stream of European naphtha being shipped to Asia, which can only be to the benefit of LR owners.”
Gulei Petrochemical of China and GS Caltex and Hyundai Chemical of South Korea are scheduled to bring new petrochemical plants online between June and September.
This development will support naphtha demand in Asia, according to Alphatanker, even though many petrochemical producers prefer to use cheap LPG as feedstock during summer at the expense of naphtha.
“The commissioning of new petrochemical cracker capacity ... should more than offset the loss of market share to LPG,” Alphatanker said. “Naphtha demand will remain relatively strong over the short term.”
While demand for refined products overall is lacklustre during the Covid-19 pandemic, naphtha consumption has remained high as petrochemical producers are operating at high rates amid buoyant plastics demand.
“Demand from the petrochemical sector has been one of the standout performers,” Alphatanker analysts said.
“This has been led by Asia as the region’s factories have been churning out packaging and medical equipment.”
Kpler data showed Asia imported 32.8m tonnes of naphtha in the first five months of this year, up from 32.6m tonnes in the same period of 2020 and 29.4m tonnes in 2019.
Moreover, Asian petrochemical producers have been buying more naphtha from Europe due to less supply from the Middle East, boosting tonne-mile demand for product tankers.
“The Middle East has built out its own petrochemical capacity over the past decade with sites such as the giant Sadara complex in Saudi Arabia now requiring to be fed with both LPG and naphtha,” Alphatanker said.
Its figures reveal European naphtha flows to Asia have risen above 100,000 barrels per day over the past year — double the level of 2019.
“[This] has been a source of Western LR2 demand so far this year,” Alphatanker said.
