Naphtha crack in Asia falls from three-week high

23-May-16

Naphtha crack in Asia has dipped from three-week highs to a three-session low of US$59.60/ton as more liquefied petroleum gas (LPG) could soon replace it, as per a trader reported by Platts. Asian petrochemical makers can replace between 5 and 15% of their naphtha feedstock with LPG. But as a general rule, Asian petrochemical makers would only do the partial switch if LPG prices are at least US$50/ton lower than naphtha. "Going forward, naphtha demand is expected to be bad. There's a scheduled maintenance at Formosa's cracker and there will be more LPG replacing naphtha," said an industry source based in Singapore. Formosa, Asia's top naphtha importer, will shut a 1.03 mln tpa cracker from August to September for maintenance. The shutdown period would result in a demand loss of more than 200,000 tons of naphtha. Formosa has already cut its naphtha spot purchases to only 60,000 tons for H1-June delivery versus between 100,000 and 150,000 tons bought for H1-May delivery as it raises the portion of LPG usage at the expense of naphtha. South Korea's Lotte Chemical was hit by an outage which prompted it to reduce its overall cracking capacity at one of its two 1-mln tpa crackers, traders said. This however could not be confirmed but traders said the impact should be small as the unit is partially running and is normal operations are expected to be restored in about two weeks. South Korea's YNCC has bought a naphtha cargo for second-half June delivery at a discount of about US$5/ton to Japan quotes on a cost-and-freight basis on Tuesday. It did not purchase any for H1-July delivery even though its tender had originally sought cargoes for H2-June and H1-July, traders said. This, however, could not be directly confirmed as buyers rarely comment on their deals.