Demand from the Asian petrochemical sector remained strong with cracker operators running their plants at high rates amid improved margins for downstream polymers driven by strong demand from China as per ICIS. Naphtha prices in Asia are expected to continue in strength in 2010 as supplies constraints persist amid recovering demand in the region. Supplies have been limited in Asia on reduced refinery runs, principally in Japan and Korea, implemented due to poor refining economics particularly for distillates. February physical cargoes were recently purchased by end-users at premiums above US$20/ton CFR Northeast Asia, up from around US$10-12/ton in November. Supplies in the region continue to be limited and delays in arbitrage shipments of naphtha from the Mediterranean have pushed up premiums. The shipments of 500,000-800,000 tons are estimated to arrive in Asia by end of January and February 2010. However, this volume is deemed as insufficient to ease supply concerns. Also adding to supply woes will be reduced naphtha exports in January. At these levels, exports will be about 100,000 tons lower than in the previous two months. Supplies from the Middle East were also reduced as naphtha has been diverted as feedstock for domestic petrochemical facilities.
Tight supply and strong end-demand in Asia have taken a toll on crack values and outright prices. Naphtha crack spreads between H1-February open-spec naphtha and February ICE Brent futures rose above US$176/ton, the highest level in 20 months. The first week of December saw open-spec naphtha prices hit a high of US$751/ton CFR Japan, the highest outright price in 14 months. Open-spec prices have since, dipped to hover above US$700/ton CFR NE Asia.
At least 22 crackers would likely be shut for maintenance in 2010 compared with 15 facilities taken off line in 2009. 8 crackers in Japan are scheduled to undergo maintenance turnarounds in 2010. 6 crackers in Asia with a combined capacity of around 2.5-3 mln tpa are expected to be taken off line in Q1-2010.While the heavy turnaround schedule at regional crackers in 2010 could weigh down on the naphtha market, the expected start-up of three new crackers should ease the impact on demand.