Petrochemical Product Prices Fall, Profits Rise! Raw Material Price Cuts Drive Profit Expansion
AI summary card
Petrochemical Product Prices Fall, Profits Rise! Raw Material Price Cuts Drive Profit Expansion
Naphtha prices plummeted 20%, dragging down general chemical product prices, but larger raw material declines actually boosted profit margins for most petrochemical products
- Naphtha prices dropped 20% week-over-week marking largest decline
- 14 out of 21 petrochemical products saw price drops
- Ethylene cracking margin rose to USD 228/Ton
- Low-density polyethylene gross profit increased by USD 194 weekly
Report interpretation
Overview
This report tracks the dynamics of petrochemical product prices in Japan during the second week of May 2026. Core data shows: Naphtha prices fell sharply week-on-week by 20.1%, leading a general decline in chemical product prices (14 out of 21 products dropped), but because raw material cost declines were larger, profit margins for most petrochemical products expanded significantly instead, with ethylene cracking profits rising by up to USD 315/Ton. This phenomenon of 'price decline but profit rise' became the main feature of this period.
Core views
Market demand showed no obvious fluctuations, and the main cause of changes in this period was significant corrections in supply-side raw material prices. As a key raw material, naphtha spot landing price in Singapore crashed by 20% in a single week, setting the largest weekly decline for the year, directly causing all petrochemical products to bear pressure — ethylene price dropped 7.7%, benzene (BZ) dropped 8%, low-density polyethylene (LDPE) dropped 2.6%. Cost decline benefited profit margins: Calculations show that except for two items (MMA polymethyl methacrylate and PTA purified terephthalic acid), all other gross margins improved across the board. Especially ethylene comprehensive profit broke through USD 228/Ton (weekly increase of USD 315), butadiene premium over naphtha rose to USD 796 (weekly expansion of USD 154), low-density polyethylene gross profit increased by USD 194 weekly, high-density polyethylene reached USD 239 expansion. This phenomenon shows that petrochemical industry chain profits are shifting from the raw material end to the processing links.
Analysis framework
The report adopts the classic petrochemical industry analysis framework: tracking the three-level transmission of 'raw material-product-spread'. First anchor benchmark raw material prices (Dubai crude/Singapore naphtha), then monitor intermediate products (ethylene/benzene series) and terminal products (polyethylene/polypropylene polymer) price fluctuations, finally evaluate corporate profitability through key spreads (e.g., ethylene cracking margin = ethylene price - naphtha cost). Special attention is paid to the unexpected fluctuations at the raw material end and their 'cost relief effect' on the overall industry chain, combined with weekly frequency data to build a dynamic profit model — when raw material decline > finished product decline, processing links gain profit expansion space, which is the core logic reflected in this week's data.
Methodology notes
Core Anchor for Petrochemical Industry Profit Margins
This analysis focuses on the linkage between raw material costs and product pricing: When raw material prices fall faster than product selling price declines (such as this time naphtha drop 20% > ethylene drop 8%), enterprises usually obtain extra profit space. This 'scissors difference' is a key indicator for judging the turning point of petrochemical enterprise earnings.
SG Naphtha Index Pricing
The report uses Singapore market naphtha spot price as the standard pricing benchmark for Asia-Pacific region (labeled as 'SG naphtha' in the report). Due to high liquidity and reflecting true trade costs, this index has become the industry general pricing anchor.
Key data
- Singapore Naphtha Price-20.1%Weekly Drop
- Ethylene Cracking MarginUSD 228/TonWeekly Increase USD 315
- Low-Density Polyethylene Profit+USD 194Week-over-Week Profit Increase
- Butadiene-Naphtha SpreadUSD 796/TonWeekly Widening USD 154
Impact & implications
Raw material cost plunge temporarily relieves Japanese company profit pressure, but end-user demand support for current spread levels needs vigilance. This data can be regarded as a phased profit redistribution in the midstream of the petrochemical industry; if raw material low prices persist, it may stimulate enterprise production recovery.
Risks
- Unexpected volatility in raw material prices may compress newly gained profit spaces
- Weak end-user demand weakens price transmission capability
What to watch
- Middle East situation potential disturbance to crude oil supply
- Whether ethylene capacity utilization rate can bottom out and rebound
- Continued deterioration trend of profit margins in special categories like MMA
- Next month capacity data change verification