Disruptions to Middle Eastern energy exports have exposed the vulnerability of Asia’s petrochemical industry, which relies heavily on imported naphtha. Countries such as China, South Korea and Japan have developed extensive naphtha-based cracking facilities to produce ethylene, propylene and other essential chemicals for the plastics, packaging, automotive and consumer goods industries. However, supply disruptions, rising shipping costs and geopolitical tensions have increased concerns over feedstock security and production costs.
To reduce their dependence on naphtha, producers are increasingly considering alternatives such as ethane and liquefied petroleum gas (LPG). Ethane can offer lower ethylene production costs and fewer by-products, particularly in regions with access to competitively priced natural gas. Naphtha, however, provides a broader range of valuable by-products, including propylene, C4 fractions and pyrolysis gasoline, which can improve overall profitability. LPG also offers potential advantages, but its suitability depends on plant design, operating capabilities and the market value of the products produced.
Switching feedstocks does not automatically guarantee lower costs. Rising demand for LPG can push prices higher and reduce its economic advantage over naphtha. For example, Saudi Aramco raised its October official selling price for propane by $55 to $680 per ton and for butane by $70 to $730 per ton. Meanwhile, weak demand for petrochemical products and polymers can limit producers’ ability to pass higher feedstock, energy and transportation costs on to customers.
These developments offer important lessons for Iran’s petrochemical industry. The country’s substantial natural gas resources and gas-based production capacity could provide a competitive advantage over naphtha-dependent Asian producers. However, seasonal gas shortages, operational disruptions, maintenance costs and limited access to markets can undermine this potential.
Iran therefore needs to focus not only on expanding production capacity but also on ensuring reliable feedstock supplies, improving operational efficiency, completing value chains and developing higher-value products. The most effective strategy will depend on the specific needs and limitations of each petrochemical complex.
Ultimately, no single feedstock is consistently the most competitive under all market conditions. Long-term success will depend on producers’ ability to balance feedstock costs, product yields, supply security and market demand. For Iran, converting its natural gas advantage into sustainable profitability requires reliable production and market-oriented investment rather than simply increasing nominal capacity.