Asia aromatics producers cut runs on naphtha supply crunch

06 January 2010 10:20  [Source: ICIS news]

SINGAPORE (ICIS news)--Asian aromatics producers have reduced their operating rates due to a naphtha supply crunch that has driven up crack spreads to near 20-month-high levels, traders said on Wednesday.

Regional naphtha demand has been robust, with China, South Korea and Japan scrambling for spot cargoes, as freezing temperatures in Europe delay arbitrage shipments to Asia.

In response to the supply crunch, some paraxylene (PX) players had reduced their rates.

For example, both of Idemitsu Kosan's PX lines were operating at 80-90% this month, and those rates would continue into February, traders said.

Taiwan’s CPC would operate its No 3 PX line at 80-90% for January and February, while its No 2 PX line was running lower at 70-80%, they said.

Several aromatics units in China were running at reduced rates due to the naphtha supply shortage, traders added.

In Japan, hydrodealkylation (HDA) and toluene disproportionation (TDP) units were operating at 35-50%, as the lack of naphtha feedstock resulted in tight toluene supply, traders said.

According to traders, around 500,000 tonnes of European naphtha had been earmarked for Asia for January delivery, but that some supply would spill over to February amid transportation difficulties.

“The delays in European shipments are supporting [naphtha] prices in the prompt month,” said a trader in Singapore.

The prompt intermonth spread widened to $8.00/tonne from $5.00/tonne earlier in the week, underscoring the price strength. Asia’s naphtha crack spread was pegged at a firm $155/tonne above Brent crude futures, close to the 20-month high of $176/tonne reached in late December.

Spot naphtha price premiums were also rising quickly to nearly $40/tonne FOB (free on board) Middle East, a trader said.

Taiwan’s Formosa Petrochemical Corp (FPC) is running its three naphtha crackers in Mailiao at reduced rates of around 90%, a company source said on Tuesday.

Additional reporting by Bohan Loh, Ong Sheau Ling and Peh Soo Hwee

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By: Felicia Loo

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