Naphtha flow from Africa's Dangote refinery boosting product tankers
May 24, 2024
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Pradeep Rajan, Asia Freight's associate editorial director, delves into the impact of West African naphtha flow from Dangote refinery on the clean tanker market, discussing ton-mile demand, pricing competitiveness, and product tanker supply dynamics.
Exporting naphtha from Dangote refinery boosts ton-mile demand in clean tanker sector.
Dangote's naphtha supply alters market dynamics, potentially easing clean tanker supply from Persian Gulf.
Deep dives
Impact of Dangkonda Refinery on Green Tanker Markets
The new Dangkonda refinery in Nigeria is set to export clean petroleum products, specifically naphtha, to the Far East and Europe. Market participants anticipate around 2-3 long-range shipments of naphtha each month initially, increasing to four shipments when the refinery is fully operational. The introduction of naphtha from Dangkonda is expected to impact the market by providing additional supply, potentially leading to competitive pricing. Companies like Trafigura and Vitol are involved in marketing these naphtha cargoes.
Clean Petroleum Product Flow Impact on Tonn Mile Demand
The clean petroleum product flow from the Dangkonda refinery is expected to influence ton-mile demand in the market. Current fleet utilization levels in the clean tanker market have been high for nearly 24 months, with minimal corrections. The alternative source of naphtha from Dangkonda could lead to more ships returning to the Persian Gulf, potentially easing supply. However, the extended voyage duration from Dangkonda to the Far East may not immediately reduce ton-mile demand, indicating that freight rates could remain elevated.
Outlook on Naphtha Export Markets and Off-Takers
The additional naphtha supply from Dangkonda is projected to impact existing markets, with Asia serving as the primary outlet for naphtha exports. European and Russian naphtha supplies to Asia have been affected by geopolitical factors, creating potential opportunities for Dangkonda's naphtha exports. While Dangkonda's shipments may not fully replace European or Russian naphtha, they are expected to contribute positively to the tanker markets, especially long-range vessels.
Nigeria's Dangote refinery, built at a cost of $20 billion and is Africa's largest, has started exporting naphtha to North Asian markets at a time when the clean tanker market is witnessing prolonged firmness. The naphtha flow from Dangote is adding to the ton-mile demand in the clean tanker sector and this could be boosting the clean tanker market in the short- to medium term.
Associate editorial director for Asia Freight, Pradeep Rajan, discusses about West African naphtha flow and its impact on the clean tanker market with Sameer Mohindru, senior editor, Asia clean tanker market, and associate editor Zoey Ng, who covers Asia naphtha market.
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