FocusAsia naphtha prices to move sideways amid poor margins

21 November 2011 05:00  [Source: ICIS news]

By Felicia Loo

SINGAPORE (ICIS)--Naphtha spot prices in Asia are likely to move sideways this week because of weak demand, ample supply from Indian refiners and negative petrochemical margins, traders said on Monday.

The open spec Asian naphtha contract for the first half of January fell by $11/tonne (€8/tonne) from Friday to $857.00-860.00/tonne CFR (cost and freight) Japan on Monday, ICIS data showed.

The naphtha crack spread versus January Brent crude futures was assessed at $52.68/tonne on Friday, down from $36.75/tonne in the previous week.

The crack spread narrowed from $57.05/tonne on Thursday, which was the highest since 1 November because of the strength in Europe naphtha prices then which in turn was underpinned by firm gasoline prices.

“The (naphtha) market does not have strength. In fact, it is limping,” said one trader.

The spread between the naphtha contracts for the first half of January and the first half of February was assessed unchanged at parity on Friday, ICIS data showed.

The inter-month spread between the naphtha contracts for the second half of January and the second half of February widened to minus 50 cents/tonne from parity in the week earlier.

Indian refiners are expected to ship out 900,000 tonnes of naphtha in December, unchanged from November at a time of high refinery runs in India and shrinking petrochemical demand, traders said.

For October, Indian naphtha exports were at 800,000 tonnes.

A few regional crackers have reduced the rates at their plants or have brought forward plant maintenance because of a margins slump and prevailing low olefins prices.  

The ethylene margin in Northeast Asia was assessed at minus $68/tonne in the week ended 18 November, according to ICIS.

“There isn’t any (naphtha) spot buying from Japan and Taiwan. Only the South Korean crackers are making small pockets of purchases,” a trader said.

Japan’s Mitsui Chemicals plans to further reduce the run rates at its two naphtha crackers this month, with the runs to be cut to around 85% capacity from the current 90%.

The company had cut operating rates at the crackers in October. Mitsui has a 450,000 tonne/year cracker at Osaka and a 617,000 tonne/year cracker at Chiba.

South Korea’s SK Energy has trimmed the operating rate at its 190,000 tonne/year No 1 naphtha cracker in Ulsan as scheduled to 70% of capacity this month because of weak market conditions.

The production at the cracker was expected to be maintained at the above level in December. The cracker was running at 80% of capacity in October.

SK Energy will continue to run its 690,000 tonne/year No 2 cracker at the same site at full rates.

Japan’s Idemitsu Kosan cut the operating rate at its 623,000 tonne/year naphtha cracker at Tokuyama to around 80% of capacity last week from 90%, following an outage at a downstream vinyl chloride monomer (VCM) plant.

The 550,000 tonne/year No 2 VCM line located in Nanyo and owned by Tosoh Corp shut production on 13 November because of an explosion. 

Tosoh's Nanyo VCM facilities, which also include a 250,000 tonne/year No 1 line and a 400,000 tonne/year No 3 line, get their ethylene feedstock from Idemitsu's cracker in Tokuyama, via a pipeline. 

Taiwan’s CPC Corp is planning to shut its 385,000 tonne/year No 4 naphtha cracker in Linyuan for maintenance on 10 December instead of February 2012 as originally planned. The shutdown is ahead of schedule mainly because of a bearish market. 

In a sign of weak demand, the spot differentials receded.

South Korea’s Honam Petrochemical bought 50,000 tonnes of spot naphtha at a discount of $3.00/tonne to Japan quotes CFR for delivery into Daesan in the second half of December.

In its previous spot purchase, Honam Petrochemical bought 25,000 tonnes at parity for delivery in the first half of December.

 ($1 = €0.74)

Please visit the complete ICIS plants and projects database
For more information on naphtha, visit ICIS chemical intelligence
Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Felicia Loo

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly