Naphtha Market

Naphtha Market Outlook 2031

• The global naphtha market was valued at US$ 249.68 Bn in 2020
• It is estimated to expand at a CAGR of 5.1% from 2021 to 2031
• The global naphtha market is expected to reach the US$ 431.53 Bn by the end of 2031

Analysts’ Viewpoint on Naphtha Market Scenario

With the start of the new financial year, manufacturers are revising their budgeting for investments and expenditures to overcome long-term implications of the COVID-19 outbreak. However, volatility of raw material prices, high prices of naphtha in North America, and shift in trends toward cheaper alternatives such as LPG are compelling market players in the naphtha market to set up business activities in Asia Pacific. Hence, market players should balance their businesses for mission-critical applications in Western countries and simultaneously capitalize on revenue opportunities in Asia to maximize profits. They should increase sales of naphtha in power plants, steel plants, fertilizer units, and paint applications.

Investment in Capacity Expansions Help Acquire Market Dominance

Major oil companies in the naphtha market are announcing the launch of clean fuel and aromatics projects as a responsibility toward the environment. They are investing in capacity expansions to incorporate naphtha splitter columns. These columns help to split the hydro-treated naphtha into light and heavy naphtha. Such columns are the main feeder to the continuous catalytic reforming (CCR) and the isomerization units, which have an operating capacity of 90,000 and 65,000 barrels per day, respectively.

It has been found that most of the industry participants have been relying on third-party distributors to reach their target customers. Distribution agreement is the most popular strategy among manufacturers in the naphtha market to increase their product penetration in various end-use cases.

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Balanced Relationship with Ecosystem Partners Necessary During COVID-19 Outbreak

Manufacturers in the naphtha market are maintaining optimum inventory levels to ensure continuity in production and supply chains during COVID-19 outbreak. Cash-rich companies are taking data-driven decisions before making inroads in new regions. Manufacturers are ensuring a balanced relationship with ecosystem partners and suppliers to prevent supply chain hiccups.

Companies are making strategic investments in new production and machinery technologies to stay financially afloat during the ongoing pandemic. Although aggressive capacity ramps are being witnessed in China, a new pandemic wave in Shanghai is grabbing the attention of market stakeholders. Complete relaxations in restrictions in Indian states such as Delhi and Maharashtra are benefitting stakeholders in the value chain.

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Sales of Naphtha Challenged by Less-expensive Alternatives such as LPG

The global naphtha market is predicted to expand at a modest CAGR during the forecast period. However, fluctuating crude oil prices and availability of less-expensive alternatives such as shale gas and LPG (Liquefied Petroleum Gas) are predicted to slowdown growth of the market. Hence, manufacturers are diversifying their sales channels in essential applications of naphtha including solvents used for paints, solvents in rubber industry, and dry-cleaning solvents to ensure high sales of naphtha.

The architecture, engineering and construction (AEC) industry is generating stable revenue streams for companies in the naphtha market. The demand for naphtha from the chemicals industry across the globe constituted to 60% of the overall demand in 2020, and this trend is predicted to continue throughout the assessment tenure.

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Marketing & Distribution Strategies Critical to Boost Naphtha Sales

Due to the highly competitive nature of the naphtha market, manufacturers are engaging in long-term contracts with raw material suppliers to overcome volatile pricing for the same. Companies are strengthening their distribution networks since the market is dictated with a high number of fragmented market players, consisting of a large number of small- and medium-scale manufacturers.

Major companies have their own distribution and marketing networks across the globe to bolster sales of naphtha. Manufacturers are maximizing their business in feedstock for petrochemical cracking or for gasoline reforming and blending.

Manufacturers Face Tug of War between Asia and America for Naphtha Sales

Petroleum naphtha is a name primarily used in the U.S. for the petroleum distillate containing mainly aliphatic hydrocarbons. Even though North America is the second-largest market, accounting for more than 20% share globally, the region is estimated to lose its strong business grounds in the near future, owing to the exponential growth in Asia Pacific. This is evident since Taiwan, India, and China are currently expanding markets for naphtha due to the burgeoning growth in plastics, construction, and automotive industries.

High prices of naphtha in North America and shift in trends toward cheaper alternatives are compelling manufacturers in the global naphtha market to gravitate their business activities in Asia Pacific.

Naphtha Market: Overview

• Naphtha, which can be found in shale oil or refined petroleum and coal tar, is a highly versatile commodity. Coal tar naphtha is a volatile commercial product obtained by the distillation of coal tar, while shale naphtha is acquired by the destructive distillation of oil produced from bituminous shale. Petroleum naphtha is a name primarily used in the U.S. for the petroleum distillate containing mainly aliphatic hydrocarbons.
• Based on application, the global naphtha market was dominated by the chemicals segment that included petrochemicals and benzene, toluene and xylenes (BTX), which accounted for more than 60% share of the market in 2020. The segment is expected to maintain its dominant position in the next six years. The main uses of naphtha are in steam cracking to make olefins; in reforming to make aromatics; and as a feedstock for high-octane gasoline. It also can be used as a solvent.
• The energy/fuel segment accounted for the second-largest share of the global market in 2020; however, it is likely to lose market share marginally by 0.1% by the end of 2031. Naphtha is utilized in power plants, steel plants, fertilizer units, etc. The others segment includes all non-renewable applications, and the segment is lose market share by the end of 2031.

Asia Pacific to Exhibit Lucrative Opportunities During Forecast Period

• Asia Pacific dominated the global naphtha market and accounted for over 60% share, in terms of volume and revenue, in 2020. India, China, and Taiwan are presently expanding markets for naphtha due to expansion of construction, automotive, and plastic industries in these countries. Currently, North America is the second-largest market, globally, and accounted for more than 20% share; however, the region is estimated to lose share in the global market in the near future. This is due to higher prices of naphtha and shift in trends toward cheaper alternatives. Shale gas is becoming an increasingly attractive substitute for naphtha in the market in North America.
• Europe is also expected to lose its share by 2031 due to higher crude oil prices and low seasonal demand for naphtha in the region. Latin America and Middle East& Africa are expected to gain share of the global market, marginally, due to new ethylene capacity.
• Naphtha is primarily used as a feedstock for petrochemical cracking or for gasoline reforming and blending. There is a significant threat of forward integration from raw material suppliers to enter market. Major portion of the naphtha produced by companies is used as a feedstock by their own petrochemical complex and the remaining naphtha is exported.
• The naphtha industry depends highly on conventional sources of raw material and exhibits volatile pricing. Manufacturers engage in long-term contracts with raw material suppliers to overcome the volatile pricing. The global naphtha market is highly fragmented and consists of a large number of small- and medium-scale manufacturers. In this highly dynamic industry, distribution plays a highly important role and is the key to success.

Naphtha Market: Competition Landscape

• Most of the industry participants have been relying on third-party distributors to reach their target customers. Distribution agreement is the most popular strategy among manufacturers to increase their product penetration in the global market.
• However, a few major companies have their own distribution and marketing network across the globe. Companies such as Shell, BP, and Chevron are among the major players in the market.

Naphtha Market: Key Development

• In 2019, Saudi Arabian Oil Co. (Saudi Aramco) launched a US$ 2.6 Bn project, named the Ras Tanura refinery clean fuels and aromatics project, to improve the environmental friendliness of the plant. Expansion project completed the installation of a naphtha splitter column in October 2019. The function of the naphtha splitter column is to split the hydrotreated naphtha into light and heavy naphtha. The column is the main feeder to the continuous catalytic reforming (CCR) and isomerization units, which have an operating capacity of 90,000 and 65,000 barrels per day, respectively.

Naphtha Market Snapshot

Naphtha Market – Segmentation

TMR’s research study assesses the global naphtha market in terms of application and region. This report presents extensive market dynamics and trends associated with different segments of the market and how they are influencing growth prospects of the global naphtha market.