Naphtha price in Asia rebounded from an 11-month low to reach a two-session high on Tuesday, while cracks surged by about 22% to a three-week high, as per Reuters. However, current levels still signal a frail market, as Japanese inventories continue at a very high level. Tosoh had shut all its three vinyl chloride monomer (VCM) plants in Western Japan following a fire that lasted about a day. The shutdown had forced Idemitsu, supplier of naphtha-based ethylene to Tosoh, to cut output at its 623,000 tpa cracker.
Naphtha cracks at healthy levels should be around US$110/ton premium. However, even after the hike they are below US$60/ton premium.
Arbitrage cargoes to the East are unlikely given the weak market in Asia and also European refineries having reduced October output to just above 80%, according to data from Euroilstock. That may have given it some marginal support but overall sentiment has not improved. Only South Korea seems to be buying spot cargoes, with YNCC having bought up to 75,000 tons for H2-December arrival at Yeosu at a discount of US$2 to Japan quotes on a cost-and-freight (C&F) basis. Despite the bearish market, Chinese import demand for plastics could pick up again, spurring a possible increase in run rates at Taiwan crackers from the average 80%
Front-month open spec naphtha for H1-January recovered by twelve dollars to US$866/ton. Cracks for H1-January jumped by over ten dollars to US$59.07/ton, highest since Nov.1.