The global naphtha market currently exhibits a fragmented landscape. Platts, a subsidiary of S&P Global Energy, forecasts that this trend will persist through 2026. In Asia, driven by ongoing capacity optimization in East Asia and uncertainty surrounding Russian naphtha supplies, the regional market will face sustained pressure from weak petrochemical margins through 2026. Europe's naphtha market will primarily experience structural contraction, while the U.S. market is projected to see a moderate recovery.
In Asia, capacity optimization and restructuring remain the core market focus. Notably, the restructuring plans of South Korea's petrochemical industry are drawing significant attention for their bearish impact on Asian naphtha import demand. In August 2025, the South Korean government unveiled a petrochemical industry restructuring plan proposing to reduce domestic ethylene production capacity by a total of 2.7 to 3.7 million tons per year, affecting petrochemical complexes in Ulsan, Daesan, and Yeosu. The government set December 2025 as the deadline for submitting restructuring plans, with companies meeting the deadline eligible for policy support such as fiscal subsidies to facilitate their transition to more sustainable and efficient operational models. Currently, Hyundai Chemical and Lotte Chemical have submitted capacity reduction plans for the Daesan complex, while LG Chem and GS Caltex are exploring integration of naphtha cracking units in Yeosu. Specific plans from other Korean producers remain to be announced. The restructuring initiative is still in its early implementation phase, with detailed timelines yet to be finalized.
In the Japanese market, overall naphtha demand shows a steady downward trend due to low petrochemical product margins and planned plant shutdowns. Maruzen's naphtha cracker at its Chiba plant is scheduled for shutdown between 2026 and 2027. Idemitsu Kosan and Mitsui Chemicals have decided to consolidate ethylene capacity in the Chiba region, reducing their combined annual output to 550,000 tons. Platts previously reported that Innosys' Kawasaki plant is expected to retire in 2028.
Uncertainty surrounding Russian supplies represents another major variable in Asia's naphtha market. Singapore traders noted that since U.S. sanctions took effect in October 2025, heightened scrutiny of Russian cargoes has significantly dampened buyer interest, with major Asian importers reducing purchases of Russian naphtha. To fill the supply gap left by Russia, arbitrage cargoes from Europe and the U.S. are increasingly flowing into Asia amid weak European demand. Although Russia-Ukraine peace talks continue, multiple Asian traders believe uncertainty surrounding Russian naphtha supply remains unresolved. However, they note that even with reduced Russian supplies, current market supply remains relatively ample. Furthermore, following the completion of upgrades at Bahrain Petroleum Company's Sitra refinery, Bahrain's total refining capacity will increase to 405,000 barrels per day, potentially boosting future naphtha supply.
In Europe, deepening carbon neutrality policies and a wave of refinery closures are projected to reduce demand for traditional petroleum-based naphtha by an average of 1.2% annually through 2026. Furthermore, the EU Carbon Border Adjustment Mechanism (CBAM) will increase production costs by $25 per ton, further dampening demand. However, aviation fuel blending demand and the advancement of bio-based naphtha substitution projects will partially offset this downward pressure. Bio-based projects by companies like Germany's BASF are gradually being implemented, steadily increasing the share of renewable naphtha.
In the U.S. market, benefiting from the slowing substitution effect of shale gas ethane and the commissioning of new petrochemical projects along the Gulf Coast, naphtha demand growth is expected to rebound to 1.8%. Although ethane cracking remains dominant, some flexible feedstock units will increase naphtha procurement to optimize profits. Meanwhile, stable demand for naphtha from high-octane gasoline blending provides support. Optimized transatlantic trade flows, with increased U.S. light naphtha exports to Europe, may further stimulate domestic demand release.
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