Naphtha crack in Asia for H2-April plunges to lowest level since Aug. 26

09-Mar-16

Buckling under the weight of persistent supply, Asia's naphtha crack for H2-April has fallen to US$48.83/ton, the lowest since Aug. 26 when the crack value for H1-October 2015 was at similar levels, as per Reuters. South Korea's Lotte Chemical came forward to buy two cargoes of naphtha for H2-April arrival at Daesan and Yeosu at discounts of US$7-8.50/ton to Japan quotes on a cost-and-freight (C&F) basis, traders said. That was the lowest price seen for cargoes to South Korea since Jan. 13, 2015, for a H2-February delivery last year, Reuters data showed. The widening discounts reflected a deeper supply glut, traders said, and Western cargoes arriving next month in Asia were still at alarming volumes from a seller's point of view. More than 1.2 mln tons of naphtha have been provisionally booked for April arrival, with some traders putting the expected amount as high as 1.5 mln tons. As there is still time to ship cargoes to Asia for April arrival, some traders were expecting the final volume to be more than 1.5 mln tons. "This is a bit more than we need as the market is not tight, for sure," an industry source based in Singapore said. In Japan, ethylene production in February fell nearly 11% from a month ago and about 5% from a year ago, official data showed. Japan's Asahi has shut a cracker permanently and Mitsubishi Chemical is expected to close one of its crackers permanently too in May. But Japan is also planning on shutting more crude units over the next few years.