UAE and Kuwait Rebuild Naphtha Flow to Asia
The United Arab Emirates (UAE) and Kuwait have increased their naphtha exports to Asia through ship-to-ship transfer operations, STS, conducted outside the Strait of Hormuz.
This mechanism is enabling the recovery of some flows to major petrochemical consumers in South Korea and Japan after disruptions caused by the regional conflict. ADNOC and Kuwait Petroleum Corp. jointly exported approximately 1.6 million metric tons of naphtha during August and September, equivalent to about 14 million barrels. This volume significantly exceeds the approximately 700,000 tons recorded between March and April, when Gulf trade routes suffered severe disruption.
STS Changes Where Transfer Occurs
STS transfer involves moving cargo from one vessel to another at sea. In this case, the operation allows naphtha from different points in the UAE to be concentrated in Fujairah and subsequently transferred to vessels that will continue the journey to Asian markets via routes that do not require transiting the strait. The logistical architecture is more complex than the headline suggests. Cargoes may include re-exports from Iraq, Ruwais, and Hamriyah, in addition to product transported by road from other UAE ports to Fujairah. From there, maritime departure and subsequent STS operations are organized.
Logistics Are Determining Naphtha Prices
Kuwait is also recovering its exports, albeit at a slower pace. KPC resumed spot naphtha offers to Japan under delivered ex-ship conditions at the end of June, after a three-month interruption. Some cargoes for early September delivery were reportedly traded at premiums of up to $45 per ton over Japanese benchmarks.
Qatar’s case shows the opposite effect. QatarEnergy offered up to 75,000 tons for loading in Ras Laffan, within the strait area, but a previously sold cargo reportedly had to accept a discount of approximately $100 per ton against Japanese benchmarks because buyers did not want to assume the risk premium associated with transit through the affected area.
The Effect Reaches Asian Crackers
The recovery of supplies from the Gulf is already impacting the Asian petrochemical industry. Naphtha cracking plants in South Korea and Japan maintained utilization rates above 70% during August and September, compared to approximately 68% in March and April, according to industry sources. Naphtha is a fundamental raw material for steam crackers, where it is transformed through thermal cracking into products such as ethylene and propylene, subsequently used to manufacture plastics, resins, fibers, and numerous chemicals. Therefore, recovering the supply of this raw material can have an effect that transcends the fuel market.
The movement also shows why a maritime disruption does not necessarily eliminate an energy supply from the market. It may force a temporary redesign of the route, relocation of cargo transfer, use of other vessels, and acceptance of higher logistical costs. The physical availability of the product remains, but its transportation economics change.
Original Article: UAE and Kuwait Rebuild Naphtha Flow to Asia — Inspenet