Asia naphtha seen weaker on supply deluge, cracker turnarounds

Focus story by Felicia Loo

SINGAPORE (ICIS)–Asia’s naphtha prices may be undermined by a deluge of supply amid receding demand because of scheduled turnarounds at regional crackers, traders said on Tuesday.

As much as 1.4m tonnes of deep-sea naphtha inflows are expected to arrive in Asia in October, they said.

The volumes were on top of the 2.0m tonnes of arbitrage naphtha imports slated for September arrivals in Asia, the traders said.

The deep-sea inflows hail from northwest Europe, the Mediterranean, Russia and the US.

“Naphtha is bearish. There are a lot of arbitrage cargoes coming in,” said one trader.

While open-spec first-half October naphtha rose by $1.50-2.50/tonne to $903.00-906.00/tonne CFR (cost and freight) Japan on Tuesday morning, the intermonth spread weakened at the close of trade on 25 August, ICIS data showed.

The spread between the first half of October and first half of November narrowed to $1.00/tonne in backwardation on 25 August, from a backwardation of $1.50/tonne on 22 August, the data indicated.

Meanwhile, demand is seen sliding amid a slew of cracker turnarounds.

There was hardly any spot buying from end-users in northeast Asia over the past week.

In Taiwan, Formosa Petrochemical Corp’s 1.2m tonne/year cracker in Mailiao is down from mid-August to 30 September.

In South Korea, Yeochun NCC (YNCC) will shut its 465,000 tonne/year cracker in Yeosu from 23 September to 22 October.

In Japan, Idemitsu Kosan is slated to take its 623,000 tonne/year cracker in Tokuyama off line for around six days from 10 September, while Mitsui Chemicals intends to shut its 617,000 tonne/year Chiba-based cracker in October for around two weeks. 

Meanwhile, a Singapore cracker operator will shut its unit in October for at least three months to undergo capacity expansion, market sources said.

Downstream, ethylene prices were getting softer, with prices down by $5/tonne during the week ended 22 August to $1,540-1,550/tonne CFR NE (northeast) Asia.

Ethylene margins, based on naphtha feed, fell to $401/tonne in northeast Asia on 22 August, compared with $453/tonne in the previous week.

Meanwhile, weak Chinese economic data also signalled slower demand in the petrochemical segment.

HSBC’s flash manufacturing purchasing managers’ index (PMI) for China declined to a three-month low of 50.3 in August from 52.0 in July.

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