In a move that reflects strong sentiment caused by tighter-than-expected supplies, Formosa has bought around 90,000-100,000 tons of naphtha at higher premiums, as per Reuters. Formosa is Asia’s number one naphtha buyer, and has bought the volumes for H2-May arrival at premiums of about US$6/ton to Japan spot quotes on a cost-and-freight (C&F) basis. This is higher than the US$4/ton it paid in April first week for 25,000 tons for H1-May arrival. Strong Western demand for naphtha and low refinery runs in Europe have also helped the market.
Last week saw Formosa cut runs at its 2.93 mln tpa cracking complex by about 5-10% from full-tilt, due to negative polyethylene margins. However, other petrochemical makers, especially those in South Korea, did not seem affected, as they were able to offset the negative margins in polyethylene with strong gains from butadiene and xylene.