Asian naphtha market shows signs of recovery

The Asian naphtha market has been trending downwards after peaking in October but is showing some signs of recovery as margins rose to a month-high yesterday.

Naphtha margins, or the Argus cfr Japan price against Ice Brent fell from $85-90/t in mid-October to $41.364/t on 25 November, a six-month low before rebounding to $63.669/t on 8 December.

The light naphtha market has been plagued by unexpected cracker shutdowns, high volumes of arbitrage arrivals and supply pressure on lower paraffinic naphtha cargoes as some heavy full-range naphtha cargoes enter the paraffinic naphtha supply.

But the return of South Korean petrochemical producer Lotte Chemical's 1.1mn t/yr naphtha cracker has supported margins. Naphtha margins exceeded $60/t for the first time since early November after Lotte yesterday achieved on-specification ethylene and propylene production at its long-idled cracker in Daesan, two days earlier than planned.

Naphtha demand has been under pressure following unplanned shutdowns at fellow South Korean producer LG Chemical's 1.16mn t/yr naphtha-fed cracker on 5 November and at Japanese refiner and petrochemical producer Eneos' Kawasaki-based 540,000 t/yr naphtha cracker in early December.

Cfr northeast Asian light naphtha differentials are showing signs of a pick-up with KPIC and Hanwha Total paying premiums of $5-6/t for January delivery cargoes with paraffin content above 77pc. Hanwha Total at the end of November paid parity to Japanese spot assessments for light naphtha cargoes for January delivery.

Heavy full-range naphtha differentials are also showing an uptick. Taiwan's private-sector refiner Formosa Petrochemical bought heavy full-range naphtha cargoes at a $4/t discount to Japanese spot assessments for 29-31 January delivery as compared to a $17/t discount to the same assessments for similar grade of cargo delivering during 10-20 January.

By Aldric Chew