OUTLOOK '12: Asia naphtha seen buoyant on tight supply

23 December 2011 04:59  [Source: ICIS news]

By Felicia Loo

Cracker turnarounds are expected to be light in 2012SINGAPORE (ICIS)--Asia’s naphtha market is expected to be buoyant in 2012 because of a lighter cracker turnaround schedule and on expectations of firm buying from China and Taiwan, but the uncertainties about the global economy may cap demand growth, traders said.

In 2012, around 16 crackers will be temporarily idled compared with 33 units this year, according to ICIS.

The region’s ethylene output loss will fall by more than 50% to at least 865,534 tonnes in 2012 compared with 2011, based on the nameplate capacities of these crackers, the traders said.

This will result in potentially higher demand for open-spec naphtha, they added.

“It depends on the overall cracker run rates. The outlook on the petrochemical market doesn’t bode well for naphtha,” a trader in Singapore said.

The two-year-old debt crisis in Europe will continue to weaken the global economy and dampen the demand for plastics amid tighter credit and financing, the traders said.

Most of the cracker turnarounds will take place in March next year. Japan’s Asahi Kasei will shut its 500,000 tonne/year cracker at Mizushima for around a month in March, while Tosoh Corp will shut its 527,000 tonne/year cracker at Yokkaichi in Japan in March for 40 days.

South Korea’s Yeochun NCC (YNCC) will take its 578,000 tonne/year Yeosu-based cracker off line from 5 March to 4 April.

Spot naphtha demand from China is expected to rise because of increased aromatics capacity, according to traders.

“The demand for heavy full-range naphtha will increase and China will import more naphtha,” a second trader said.

China, the world’s dominant energy user, is expected to remain a net naphtha importer next year.

According to customs data, China imported 213,980 tonnes of naphtha in October 2011 and exported 30,436 tonnes of naphtha in the same month.

Asia is expected to receive continuously low naphtha supply from Europe, where refineries are likely to be operated at reduced rates because of low margins, the traders said.

Around 150,000 tonnes of deep-sea Western naphtha will be shipped to Asia in December, compared with a monthly average of 300,000-500,000 tonnes in 2010, they added.

The tighter supply will boost Asian naphtha prices, the traders said. The price differentials of heavier-grade naphtha will be well-supported as downstream paraxylene (PX) prices may be underpinned by a supply squeeze early next year, because of multiple purified terephthalic acid (PTA) expansions and major planned turnarounds in the first quarter of 2012, traders said.

As a sign of positive times ahead, naphtha term contracts from the Middle East fetched firm premium prices.

In December 2011-November 2012, Kuwait Petroleum Corp’s (KPC) full-range naphtha was at a premium of $18.50/tonne (€14.20/tonne) to Middle East quotes FOB (free on board), while term light naphtha was at Middle East FOB plus $20/tonne.

The company placed its term naphtha cargoes for lifting in December 2010-November 2011 at a premium of $12/tonne and light naphtha at a premium of $13/tonne.

A recovery in butadiene (BD) prices, which are being supported by limited supply and production cuts, will boost the naphtha market in 2012, the traders said.

The naphtha crack spread surged to $90.48/tonne in early December, the strongest in two months, ICIS data showed.

Taiwan’s Formosa Petrochemical Corporation (FPCC) bought on 15 December 150,000 tonnes of spot naphtha for delivery in the second half of January, its first spot purchase since August and after lifting the operating rates at its three crackers to 85-86% from 80-85% previously.

The cargoes were transacted at a premium of $3.00-3.50/tonne to Japan quotes CFR (cost & freight). FPCC ceased spot naphtha imports from August to mid-December because of cracker shutdown issues.

The demand from FPCC is expected to remain strong in the first half of next year because the company has scheduled to shut its 700,000 tonne/year No 1 cracker at Mailiao for a 40-45 day turnaround in August 2012.

The company also operates a 1.03m tonne/year No 2 unit and a 1.2m tonne/year unit at the same site.

“The naphtha is on a price uptrend and this will go on until the Lunar New Year,” a third trader said.

($1 = €0.77)

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

By: Felicia Loo

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