Firm demand from the new naphtha crackers (including Formosa's No 3 cracker) as well as expanded capacities at existing crackers, with fewer planned maintenance turnarounds, coupled with steady supplies from the Middle East and India - all these factors may halt the surplus that flooded Asian markets last year and will support Asia's naphtha market this year. It seems that a long period of extensive surpluses has come to an end as Middle East volumes will not see any increase and Asian crackers begin to increase their deficits for the first time in a couple of years. This is reflected in the fact that Brent/naphtha crack, a gauge of the market's strength, which hit a six-month high of more than US$115 a ton for February last week- continues to hover at US$110, despite weaker term premiums for H1-2007 supplies.
On the demand side: Taiwan's Formosa Petrochemical Corp's new 1.2 million tpa cracker is scheduled to start up around the middle of the year. The top naphtha consumers in the region- Japan's petrochemical firms plan to shut down fewer naphtha crackers for maintenance this year compared with the heavy schedule last year, leading to more naphtha consumption. Upgradation at several South Korean petrochemical firms will also exert pressure on naphtha demand.
On the supply side: India's naphtha exports is estimated to fall from last years' levels of record-high volumes of more than 700,000 tons for August loading. Naphtha exports from the Middle East will continue to be maintained at levels of 30 million tpa.
This will lead to a situation where the Eastern surplus will end in 2007, and the world will be fairly well balanced with the East occasionally short, which will provide more chances for European cargoes to be shipped to the East. The tighter market for naphtha may open more opportunities to ship in cargoes from Europe. An estimated 340,000 tons of Mediterranean and European naphtha were booked for this region in early December.
09-Jan-07 
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