Asian refiners to cut back on naphtha imports
2/19/2016 12:00:00 AM
By Seng Li Peng
SINGAPORE, Feb 19 (Reuters) -- Asia is to receive no more than 1.5 million tons of naphtha in March from the West including Europe, said five traders polled by Reuters, making this the lowest monthly volume arriving in the East since October.
February arrivals are expected to be about 1.7 million tonnes.
While the reduced volume has lifted spot prices, a weak gasoline market and cracker maintenance in North Asia in March are capping price gains and preventing open-specification naphtha prices from rising too sharply, traders said.
But cargoes arriving in first-half April in South Korea, Asia's top naphtha importer, were sold at about parity to Japan quotes on a cost-and-freight (C&F) basis versus discounts of $2.00 to $6.50/ton for March cargoes.
"The market was improving but it underwent a correction after traders factored in the cracker maintenance in Japan and South Korea," said a Singapore-based industry source.
"Refinery maintenance is also taking place in March but we are not sure what the net demand/supply is right now."
Japan's Tosoh is shutting its 527,000-tpy cracker in early March for a one month's long turnaround, while South Korea's Yeochun Naphtha Cracking Centre will idle a 580,000-tpy cracker for a 30-day maintenance starting in mid-March.
Naphtha demand will decline at least 200,000 tons in March because of the maintenance.
On top of these, Japan's Asahi will permanently shut a 504,000-tpy cracker in March. Japan is also closing down some of its crude distillation units over the next few years on weaker domestic demand.
Depending on the grades, naphtha can also be used as a gasoline blendstock other than being cracked into petrochemical products such as ethylene and propylene, raw materials for plastics.
Europe was recently grappling with high gasoline supplies and was storing some of the motor fuel on tankers after onshore tanks were filled up. This leads to limited demand for naphtha as a blendstock.
"It's not easy to make a call now on how much more naphtha Europe would push to Asia because demand from their petrochemical sector should still be firm," said a second Singapore-based industry source.
(Reporting by Seng Li Peng; Editing by Christian Schmollinger)
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