Japanese petrochem makers mull added imports of naphtha

23-Jul-09

Poor refining margins have forced Japanese refiners to cut crude runs, while increased demand for naphtha from petrochemical firms has lead to lower inventories. Though Japan's naphtha stocks that had dipped to 11 year lows, have risen, inventory levels continue to be low. As demand from China strengthens, Japan’s petrochemical makers mull added imports to operate crackers at full throttle to offset reduced domestic supply due to lower refining rates. This increase will not result in increase in import levels very much higher than Japan's monthly average of 1.0-1.2 mln tons. Idemitsu Kosan Co and Showa Denko raised their naphtha cracker output to near full capacity. With supplies increasing from Kuwait, India and the West, spot naphtha has risen to 1.6 mln tons in Asia in the past 2 weeks, depressing premiums on spot deals. The crack spread is currently at US$$76/ ton, about 10-12 dollars lower than at the start of the month.