Healthy cracker runs, tight supply keep Asia naphtha buoyant

SINGAPORE (ICIS)–Asia’s naphtha prices remain well supported by high run rates at regional crackers and tighter supply, allowing the market to shrug off the continued slump in crude values, traders said on Thursday.

First-half March open-spec naphtha inched down by 25 cents/tonne from a day ago to $317.25-319.25/tonne CFR (cost & freight) Japan in spite of overnight losses in global crude futures.

On 20 January, NYMEX WTI crude futures for February delivery fell $1.91/bbl to close at $26.55/bbl, while Brent crude futures for March delivery settled 88 cents lower at $27.88/bbl.

Open-spec naphtha prices are holding up well despite US crude futures continuously falling to multi-year lows, they said.

“The crackers are running well in Asia and less supply is available,” one trader said.

Crude futures were reeling from another rout in the global stock market, as downbeat economic data from China, and the potential of Iran exporting more oil into an already oversupplied market after sanctions were finally lifted, spooked investors.

China is the world’s second-biggest economy after the US.

At 03:12 GMT, crude futures are trading at $28/bbl levels.

Meanwhile, the naphtha crack spread versus Brent crude futures widened by 2% to $108.20/tonne on 20 January, ICIS data showed.

Deep-sea naphtha supply bound for the east of Suez is expected to fall in February, along with a shrinking east-west spread, which narrowed to $27.25/tonne from $33.00/tonne in the previous week, the traders said.

Asia is expected to receive around 1.8m tonnes of arbitrage naphtha from the West in February, down from 2.2m tonne this month, they said.

The arbitrage cargoes will hail from northwest Europe, the Mediterranean, Russia and the US.

Meanwhile, supply of light naphtha tightened on news of South Korea’s S-Oil shutting down its 90,000 bbl/day condensate splitter following a fire this week. There is no word on when the unit will restart.

On the other hand, demand for naphtha is stable amid generally healthy run rates at crackers in the region.

Taiwan’s Formosa Petrochemical Corp (FPCC) is running its three Mailiao-based crackers – with a combined capacity of 2.93m tonnes/year – at full tilt this month, similar to levels in December last year, a source close to the company said.

The crackers use naphtha as the main feed, with liquefied petroleum gas (LPG) making up less than 10% of the feed, the source said.

Also in Taiwan, CPC Corp is currently operating its 720,000 tonne/year No 6 cracker in Linyuan at above 90% of capacity since the weekend of 16/17 January after technical issues at the unit were resolved, a source close to the company said. 

Meanwhile, CPC’s 385,000 tonne/year No 4 cracker at the site is on schedule to complete maintenance by the end of January. The plant has been shut since 11 December.

In South Korea, Yeochun NCC (YNCC) has ramped up production at its 857,000 tonne/year No 1 cracker in Yeosu, and the unit is now running at “normalised” rates, a company source said.

The cracker’s operations were adjusted up over the weekend from 70-80% previously, the source said, but he declined to reveal the plant’s actual run rate.

LG Chem, meanwhile, is operating its 1.15m tonne/year cracker in Yeosu and its 1m tonne/year cracker in Daesan at full capacity, according to traders.

In Indonesia, Chandra Asri restarted its 860,000 tonne/year naphtha cracker in Cilegon since 18 January, following an unexpected shutdown on 14 January, market sources said.

Meanwhile, the ethylene margin using naphtha feed rose by $45/tonne from 8 January to $577/tonne during the week ended 15 January, according to ICIS Weekly Margin report.

A healthy ethylene margin is a fillip to the naphtha market.

In addition, the prolonged shutdown at Shell’s 960,000 tonne/year Pulau Bukom cracker in Singapore since late last year is expected to support high runs rates among other crackers in Asia, the traders said.

“With Shell Bukom down, the other regional cracker will keep their runs high and this will underpin the naphtha market,” said one trader.

Focus article by Felicia Loo