China’s petrochemical industry is undergoing a significant strategic reorientation, with escalating demand for naphtha set to propel imports to unprecedented levels this year. This pivotal shift reflects not only the robust expansion of domestic ethylene production capacity but also a deliberate reassessment of feedstock sourcing strategies, moving away from U.S.-origin propane and ethane. This re-evaluation is primarily driven by persistent trade tensions and the critical imperative for supply chain diversification.
- China’s petrochemical sector is strategically pivoting towards increased naphtha utilization as a primary feedstock.
- Naphtha imports are projected to reach an all-time high of 16-17 million metric tons in 2025, up from approximately 12 million tons in 2024.
- This shift is driven by new ethylene capacity additions (4 million tpy by end-2025, 6 million tpy by H1 2026) and a move away from U.S. propane and ethane due to trade tensions and the need for supply diversification.
- Naphtha imports saw a 22.81% year-on-year increase for January-May, totaling nearly 6 million tons, the highest since 2015.
- The robust demand for naphtha is expected to significantly boost Asian refiners’ margins.
Strategic Drivers and Supply Diversification
The prior reliance on U.S. propane and ethane, which once offered significant cost advantages, has waned considerably due to disruptions arising from evolving trade dynamics. This situation has fostered a “trust factor” concern, as noted by Pankaj Srivastava of Rystad Energy, compelling cracker operators to increasingly favor naphtha. Naphtha benefits from a more globally diversified supplier base, making it a more secure option. The imperative to broaden supply sources fundamentally underpins this resurgence in naphtha demand.
Rising Capacity and Import Trends
The continuous expansion of new ethylene production facilities serves as a primary catalyst for this surge in naphtha consumption. China is on track to add approximately 4 million tons per year (tpy) of ethylene capacity by the end of 2025, with further expansion to about 6 million tpy anticipated by the first half of 2026. This substantial increase in production capability directly correlates with the heightened requirement for naphtha as a foundational feedstock.
This strategic recalibration is clearly reflected in recent import data and future projections. Leading consultancies Rystad Energy and FGE forecast China’s naphtha imports to achieve an all-time high of 16-17 million metric tons in 2025, marking a substantial increase from the approximately 12 million tons imported in 2024. Separately, JLC projects 2025 imports to be around 15 million tons. Government statistics reveal a significant 22.81% year-on-year increase in naphtha imports for the January-May period, reaching nearly 6 million tons—the highest volume recorded since 2015. Further reinforcing this commitment, China has issued nearly 24 million tons in its second batch of 2025 naphtha import quotas, almost doubling last year’s allocations. Key global suppliers contributing to China’s naphtha supply include Russia, the United Arab Emirates, and South Korea, highlighting the diversified sourcing strategy.
Market Implications and Feedstock Dynamics
The International Energy Agency (IEA) projects a substantial rise in China’s naphtha demand, forecasting growth of approximately 6% in 2025 and 8.6% in 2026. This growth significantly outpaces the projected increases for propane and ethane, which are anticipated to grow by 2.3% and 1.3% respectively during the same periods. In terms of current imports, propane shipments increased by 6% year-on-year to 12.3 million tons in the first five months, while ethane imports remained stable at 2.3 million tons over the same period. Energy Aspects further anticipates a slowdown in China’s liquefied petroleum gas (LPG) imports, including propane, in the third quarter, largely due to ongoing caution concerning U.S. cargoes. This robust and sustained demand for naphtha is poised to significantly bolster the margins of Asian refiners, with naphtha margins over Brent crude already climbing about 4% this month to reach $73.30.
Sophia Patel brings deep expertise in portfolio management and risk assessment. With a Master’s in Finance, she writes practical guides and in-depth analyses to help investors build and protect their wealth.