FocusAsia naphtha faces pressure from subdued C2, poor C3 markets

04 October 2012 09:46  [Source: ICIS news]

By Felicia Loo and Helen Lee

SINGAPORE (ICIS)--Asia’s open-spec naphtha prices could face downward pressure given subdued ethylene demand and a bearish propylene market, with lower cracker run rates persisting in Japan, traders said on Thursday.

A looming possibility of further cuts in cracker utilisation is also weighing on the naphtha market, they said.

Open-spec naphtha prices slumped to a two-week low on Thursday morning at $926-928/tonne (€722-724/tonne) CFR (cost and freight) Japan, also partly because crude futures settled lower on Wednesday.

Naphtha is being supported by limited deep-sea flows from Europe, keeping the open-spec premiums at $14-15/tonne to Japan CFR quotes, market sources said.

At midday, the northeast Asian ethylene market has been subdued and prices were unchanged from Wednesday at $1,300-1,350/tonne CFR NE (northeast) Asia, according to ICIS data.

Going forward, ethylene buyers are bearish on the market on expectations of increased availability of November-loading cargoes from Japan’s Mitsui Chemicals and South Korean producer Yeochun NCC (YNCC), market participants said.

“The [naphtha) demand is thin on the cracker side. The high FOB [free on board naphtha] premiums are not directly linked to the CFR end-users’ prices,” said a trader in Tokyo.

The outlook on ethylene, however, is pessimistic when China returns from its week-long holidays, market participants said.

China is closed for Mid-Autumn Festival and National Day holidays from 30 September to 7 October.

“The post-holiday [ethylene] outlook on demand is weak so ethylene prices may decline,” said a market participant.

Compounding the situation is the Asian downstream propylene (C3) market, which is facing a surplus in supply that could pressure down prices.

Most of the end-users in China already stocked up on sufficient propylene inventories ahead of the holidays, suggesting there would not be any increase in demand, sources said.

Offers for Asian propylene (C3) fell by as much as $40/tonne this week as an outage at Nippon Shokubai’s 460,000 tonne/year acrylic acid plant at Himeji, Japan, freed up propylene supply in the regional spot market.  With no firm restart date for the plant following an explosion on 29 September, propylene prices may continue to fall, they added.

Amid such backdrop, the crackers, particularly in Japan, are increasingly getting conservative on their plants’ operating rates, traders said.

“It’s a tough situation. The run rates will continue to be low,” said one trader in Tokyo.

Japan’s Mitsui Chemicals may cut operating rates at its 617,000 tonne/year naphtha cracker in Chiba in November, from 80% currently, because of the turnarounds at downstream derivative units, a company official said on 4 October. 

The company is currently running its other 450,000 tonnes/year naphtha cracker in Osaka at 80% capacity, he added.

Another Japanese producer, Mitsubishi Chemical, is keeping an average run rate of 85% at its three naphtha crackers this month, a company source said. The company operates a 392,000 tonne/year No 1 cracker and a 489,000 tonne/year No 2 cracker in Kashima, and; a 500,000 tonne/year cracker in Mizushima.

Japan’s imports of naphtha for the petrochemical sector in August fell by 5.6% month on month to 1.17m tonnes, according to the Ministry of Economy, Trade and Industry (METI).

($1 = €0.78)

Additional reporting by Becky Zhang

By: Felicia Loo

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