Asia to receive 2m tonnes deep-sea naphtha supply in Jan

(adds details in paragraph 8-16)

SINGAPORE (ICIS)–Asia is set to receive some 2.0m tonnes of deep-sea naphtha supply from the West in January, traders said on Friday.

The volumes rose from 1.8m tonnes of arbitrage inflows bound for Asia in December from northwest Europe, the Mediterranean, Russia and the US, they added.

The increase in supply came at a time of declining crude-led naphtha prices.

US crude futures fell to below $60/bbl amid oversupply and bearish demand.

Crude oil prices have since declined since OPEC decided against cutting its output quota amid the highest US production in more than three decades.

First-half February on-spec naphtha contract fell by $8-9/tonne from Thursday to  $482.50-485.50/tonne CFR Japan on Friday in response to overnight crude losses.

Separately, the spread between the first half of February and the first half of March naphtha contracts deepened the contango to $4.75/tonne on 18 December from $4.00/tonne in contango on 17 December, ICIS data.

Meanwhile, demand is seen stable-to-soft on prospects on run cuts in the region.

Taiwan’s Formosa Petrochemical Corp (FPCC) plans to reduce the run rates at its three crackers in Mailiao to around 90% next month from around 100% currently due to weaker margins, according to a company source.

The cut in operating rate will be implemented on 1 January, the source said.

FPCC has three crackers with a combined ethylene capacity of 2.93m tonnes/year.

The company also plans to replace naphtha with liquefied petroleum gas (LPG) for around 10% of the total feed in January, the source said.

Cracker margins have been under pressure from a recent collapse in regional propylene prices, and generally weaker prices for other olefins and aromatics.

Japan’s Asahi Kasei Chemicals plans to operate its 500,000 tonne/year naphtha cracker in Mizushima at reduced rates in the first quarter because of reduced demand from its downstream affiliates, a source close to the company said on 19 December.

The company will cut in early January its cracker operating rates to around 90% capacity from 90-95% currently, in view of the weak conditions in the downstream styrene monomer (SM) market, the source said.

The source added that the cracker run rates will likely remain at reduced levels through to March as some of its downstream operations are scheduled for maintenance late in the first quarter.

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections