Asian Naphtha Cracks Climb Higher with Fears Over Demand-Supply Imbalance
- 04-Feb-2021 11:00 AM
- Journalist: Robert Hume
Naphtha cracks across Asia are running bullish since the start of 2021 with firm olefins demand and constrained supplies as the key price drivers. Several traders remained of the view that more purchase tenders from the North Asian buyers would navigate the price direction this month. Regional traders highlighted that narrowed run rates may curb supplies from Asia’s regular exporter, Europe but exports from the US may remain voluminous.
South Korea’s Naphtha consumption holds nearly 15.9% share in the North Asian Naphtha Demand (excluding China). A strong demand-push from South Korea has been noted with the expected restart of some Naphtha-fed crackers (from turnarounds) in January and February including YNCC and LG Chem. In a tender closed on Tuesday, South Korea’s Yeochun NCC Co. Ltd. (YNCC) has invited bids for open-spec Naphtha with deliveries scheduled in mid-March or April-starting. The news came after LG Chem sought open-spec Naphtha cargo for delivery in the first half of April on a cost-and-freight (C&F) basis.
The demand is likely to soar even in Southeast Asia, where PTT Global Chemical is being heard commissioning its first Naphtha-steam cracker in February and JG Summit is planning to soon ramp-up run rates at its 160,000 tonne per year expansion capacity.
Growing Asian appetite meant higher Naphtha arbitrage supplies arriving from the westwards in March which have been totaled around 1.7 million tonnes in January and February each. The CFR Japan Naphtha crack to Brent crude margin was averaged around USD 95 per tonne in January, up from USD 89 per tonne noted in December.
As per the details revealed by our market sources, India’s Reliance Industries Ltd. (RIL) has released a 55,000 tonne Naphtha cargo for Feb-end to March loading at rates USD 24-24.50 per tonne above what Middle East quoted to the Aramco Trading Company.
As per ChemAnalyst, the growing demand is in lieu of rising Naphtha consumption as a petrochemical feed backed by its crucial role in tackling the pandemic. Demand for Naphtha-a key petrochemical feedstock refined into several olefins which act as building blocks in production of almost everything starting from medical plastics to car parts has pushed global refiners to ramp up their run rates. Buoyant Asian demand has resulted in great inflows of Naphtha cargoes from the US Gulf which hit almost 9-months high for the January loading. With Asian Naphtha producers anticipating phenomenal gains in the product margins, prices are likely to maintain an upward trajectory in the coming months.