Naphtha and ethylene prices in Asia to be on a decline on weak downstream demand

Price of naphtha and ethylene is expected to be on a decline in Asia due to weak demand for downstream products - styrene monomer (SM) and polyethylene (PE), as per ICIS. A possible prolonged shutdown at Formosa’s cracker in Taiwan is further dampening outlook for naphtha. The intermonth naphtha spread between H1-July and H1-August contracts was assessed at a backwardation of US$3.50/ton - the weakest since 21 February, according to ICIS data. Naphtha prices were at US$983.50-986.50/ton CFR (cost and freight) Japan at the end of the previous week. Reflecting the bearish market, South Korean’s Yeochun NCC (YNCC) has bought 50,000 tons of spot naphtha a very weak premium of US$1.50/ton to Japan quotes CFR for delivery into Yeosu in H1-July. Meanwhile, Asian SM prices slipped below US$1400/ton CFR China this week amid poor downstream styrenic resins demand. SM buyers were hesitant to commit as they expect spot prices to fall further. High density PE (HDPE) spot prices have weakened by ten dollars to below US$1350/ton CFR China, on the back of sluggish downstream demand and softer leading domestic prices. Buyers opted to monitor the market this week, while waiting for more offers to emerge next week. However, they reiterated that purchases would be limited to small lots. Ethylene prices slipped to US$1250-1270/ton CFR NE Asia on Friday, reflecting the latest deal in the spot market. On 20 May, ethylene prices were at US$1320-1350/ton CFR NE Asia. Supply has improved since, as there is plenty of ethylene supply in the region, especially with crackers returning from maintenance. Idemitsu Kosan is running its 374,000 tpa naphtha cracker in Chiba, Japan, at almost 100% following completion of a scheduled turnaround from 27 March to 18 May. Its 623,000 tpa naphtha cracker at Tokuyama is also running at close to full capacity. Korea Petrochemical Industry Co (KPIC) has restarted its 470,000 tpa cracker at Onsan on 23 May and is currently running the unit at full tilt. The company also resumed production at its downstream high-density polyethylene (HDPE) facility, and operating rates at all lines are currently at 80% or higher. The KPIC cracker was shut on 18 May because of technical problems, curtailing the supply of ethylene to the HDPE plant. Shell is also back on track, hence spot ethylene demand will weaken further. Shell is currently running its 800,000 tpa cracker at Bukom Island, Singapore at 60-70% of capacity, after achieving on-spec production on 19 May. Spot naphtha demand is on a decline, as Taiwan's Formosa Petrochemical Corp (FPCC) has yet to set a date for the restart of its 700,000 tpar No 1 cracker in Mailiao that was shut on 12 May. A fire broke out at the Formosa group’s Mailiao petrochemical complex late on 12 May, causing a power outage that shut the No 1 cracker, along with several other downstream plants. Some of the affected plants, including FPCC's 260,000 tpa acrylonitrile (ACN) plant and Formosa Plastics Corp's (FPC) 500,000 tpa polyvinyl chloride (PVC) unit, have since been restarted.
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