Asian Naphtha Records Prominent Recovery on Premium Contract Purchases and Increasing Consumption
- Journalist: Francis Stokes
The Asian Naphtha market was under pressure since the last two months due to indefinite cracker turnarounds and supply overhang from western countries. After a prolonged suit, Naphtha margins have showcased promising signs of recovery with its values reaching a month on high this Tuesday. Market sentiments have primarily boomed with the resumption in activities of South Korea’s LOTTE Chemical Naphtha cracker plant with a capacity of 1.1 million tonnes per year.
As per the sources, Naphtha margins significantly exceeded when LOTTE Chemicals achieved early production of Propylene and Ethylene in a long-idled cracker plant in Daesan. Differentials of Naphtha in CFR Northeast Asia have showcased signs of sturdy pick-up with renowned producers like Hanwha Total and KPIC purchasing January contract cargoes of Naphtha with 77 percent Paraffin content at a premium of USD 5-6 per tonnes. Besides, Hanwha Chemicals was heard surrendering to the price parity to Japanese spot cargoes in November. Naphtha values are anticipated to rally upwards in winter months on the back of its increased preference over its cracking competitor propane due to the better affordability. Although Naphtha values have remained much below the pre-pandemic level, it has performed way better than other refinery products in 2020. Weak margins of Naphtha started retracing its track after the revival in gasoline values in the Asia Pacific market.
As per ChemAnalyst,” with the recent announcement of OPEC reducing its production cuts in January, Naphtha cracker margins could be shrouded with concerns of a gradual drift in the middle of 2021.”