China stands poised to shatter all previous records for naphtha imports in 2025, a critical development for global energy markets and petrochemical investors. A confluence of new plant startups and a strategic shift away from potentially volatile U.S. propane and ethane supplies is driving this unprecedented demand. Industry analysts and traders anticipate this surge will significantly bolster refiners’ margins for the vital petrochemical feedstock.
Strategic Reorientation in China’s Petrochemical Sector
For years, China’s vast petrochemical industry, the world’s largest, embraced cheaper U.S. propane and ethane as primary feedstocks. However, the tumultuous U.S.-China trade relations disrupted these supply lines, forcing cracker operators to re-evaluate their procurement strategies. This geopolitical friction has ignited a strategic pivot, with a portion of demand now redirecting back to naphtha.
This critical reorientation is not merely a reactive measure; it also addresses a fundamental need for supply diversification and caters to the burgeoning capacity of new petrochemical facilities. Forecasts from leading consultancies Rystad Energy and FGE project China’s naphtha imports will reach an all-time high of between 16 million and 17 million metric tons in 2025, equating to approximately 144 million to 153 million barrels. Another prominent firm, JLC, offers a slightly more conservative, yet still robust, estimate of around 15 million tons for the same period. These figures represent a substantial leap from the approximately 12 million tons imported in 2024, according to official data.
“The lingering uncertainty surrounding U.S. ethane and propane imports has introduced a trust deficit for American cargoes,” observed Pankaj Srivastava, Senior Vice President of Commodity Markets at Rystad Energy. “Naphtha, by contrast, operates independently of these particular concerns due to its highly diversified global supplier base.” This inherent supply resilience makes naphtha an increasingly attractive and reliable option for Chinese operators seeking stability.
Robust Capacity Expansion Fuels Demand
The acceleration of China’s ethylene production capacity is a primary catalyst for the escalating naphtha demand. By the close of 2025, an additional 4 million tons per year (tpy) of ethylene capacity is slated to commence operations within China. This expansion trajectory continues into 2026, with projections indicating a further increase to approximately 6 million tpy by the first half of that year. Such significant capacity additions necessitate a steady and reliable influx of feedstock, with naphtha now positioned as a preferred choice.
Confirming this trend, the International Energy Agency (IEA) highlighted in its July report that China’s naphtha demand is set for substantial growth. The IEA anticipates an approximate 6% rise in 2025, followed by an even more vigorous 8.6% increase in 2026. This growth trajectory significantly outpaces the projected combined growth of propane and ethane demand, which is forecasted at a modest 2.3% in 2025 and 1.3% in 2026. The divergence underscores a clear market preference for naphtha in the coming years.
Policy Support and Shifting Import Dynamics
In a clear signal of strategic intent, China’s government issued a second tranche of 2025 naphtha import quotas in June, totaling nearly 24 million tons. This allocation nearly doubles the quotas granted in the previous year, demonstrating official support for increased naphtha procurement and production stability. The actual import data for the early part of the year further validates this trend, with nearly 6 million tons of naphtha imported between January and May. This figure marks a robust 22.81% year-on-year increase and represents the highest level for this period since 2015.
The geographical diversification of naphtha suppliers is also notable. During the January-May period, Russia, the United Arab Emirates, and South Korea emerged as China’s largest naphtha providers, illustrating the broader base of supply compared to the concentrated U.S. focus for propane and ethane. In contrast, propane imports during the first five months saw a 6% year-on-year rise to 12.3 million tons, while ethane imports remained flat at 2.3 million tons over the same period. Furthermore, Energy Aspects noted in a July 4 report that China’s liquefied petroleum gas (LPG) imports, which include propane, are likely to remain subdued in the third quarter due to continued cautious purchasing of U.S. cargoes.
Implications for Asian Refining Margins
This robust and sustained demand for naphtha from China is expected to provide significant underpinning for Asian refiners’ margins. The current market sentiment reflects this optimism, with naphtha margins already climbing approximately 4% this month, settling at $73.30 over Brent crude. This positive movement is directly attributable to expectations of healthy feedstock demand emanating from the world’s largest petrochemical hub.
“The increased procurement from China will exert upward pressure on naphtha crack spreads, particularly towards the middle of the third quarter and into the fourth quarter,” predicted Rystad’s Srivastava. For investors monitoring the energy and petrochemical sectors, these trends signal a pivotal shift, positioning naphtha as a key commodity to watch and Asian refiners as potential beneficiaries of China’s evolving feedstock strategy.
