UpdateS Korea's YNCC restarts No 2 cracker at reduced rate

14 January 2011 05:00  [Source: ICIS news]

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By Helen Lee

SINGAPORE (ICIS)--South Korea’s Yeochun NCC (YNCC) has restarted its 578,000 tonne/year No 2 cracker after it was shut because of a fire, but will run it at a reduced rate of 85-90% for the next three months, a company official said on Friday.

The Yeocheon-based No 2 cracker was restarted at around 03:00-04:00 hours South Korea time (18:00-19:00 GMT) and on-spec production was achieved at 10:00 hours local time, the official said.

“Repairs on the affected furnace will take three months. Therefore, the operating rates of the No 2 cracker will be cut to 85-90% for the next three months,” he said.

The official said they would also have to cut two ethylene term cargoes of about 3,000 tonnes each per month for the duration of the repairs.

“Ethylene supply will be tight after the Lunar New Year [in early February] because we have to prepare for the upcoming turnaround,” he said.

“We’re worried about our supply,” he added.

Meanwhile, a 3,000 tonne spot ethylene cargo was heard sold at $1,250/tonne (€938/tonne) CFR (cost & freight) Korea for February loading, up by $50/tonne from previous bid levels.

The company was also raising the production at its No 2 Yeosu-based aromatics unit to 100% after it was cut back to 75% on Thursday due to the shutdown of the cracker, a company source said.

The No 2 facility can produce 120,000 tonnes/year of benzene, 60,000 tonnes/year of toluene and 40,000 tonnes/year of solvent grade xylene.

YNCC is also expected to reduce its spot naphtha purchases for the duration, in tandem with the lower run rates.

The company would buy just five to six spot naphtha cargoes each month, down from the usual eight cargoes a month. Each cargo is 25,000 tonnes.

The Asian naphtha crack spread versus Brent crude futures would deepen losses, after hitting a three-month low of $126.60/tonne on Thursday, ICIS data showed.

“Spot naphtha premiums will weaken," said a trader, referring to YNCC's lower run rates for the next three months.

The naphtha market was in a deluge, especially with an armada of deep-sea inflows from Europe and the Mediterranean.

Some 400,000-500,000 tonnes of Western arbitrage material would land in Asia next month, beating earlier estimates of 250,000 tonnes, traders said.

Poor gasoline economics in Europe forced more naphtha shipments heading eastwards because refineries churned out more naphtha instead of gasoline, they added.

Meanwhile, onshore inventories of naphtha, gasoline and reformate in Singapore soared 1.217m barrels in the week ended 12 January to 10.592m barrels, industry data showed.

Reflecting a bearish market, Asia’s naphtha backwardation between the second-half February and second-half March contracts narrowed sharply to $4/tonne, the weakest since 9 November, according to ICIS data.

Additional reporting by Felicia Loo, Chow Bee Lin and Mahua Chakravarty

($1 = €0.75)

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By: Helen Lee
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