Naphtha cracker shutdowns to be delayed in Asia

01-Feb-07

The Asian naphtha market has strengthened sharply in recent weeks due to a severe supply shortage. Naphtha's spread against Brent crude -- the Brent/naphtha crack that is the benchmark indicator for the strength of naphtha -- hit three-year highs last week. Honam Petrochemicals and Sanyo Petrochemical have decided to delay scheduled shutdowns from the first half of this year. The deferral of these shutdowns will tighten the naphtha market in first half of 2007 considering reduction in supply due to heavy refinery maintenance in the May-June period. This supply shortage along with the additional demand is likely to further tighten a naphtha market already suffering supply shortages. Maintenance shutdown of South Korea's Honam Petrochemical Corp.'s 720,000 tpa cracker will be delayed from May, and of Japan's Sanyo Petrochemical Co. 450,000 tpa cracker from March/April. Honam would shift its month-long turnaround from May to October due to strong petrochemical margins at a time when several crackers will be shutdown, as well as due to internal reasons. For Sanyo, the regulator lifted an order for the firm to conduct maintenance every year after past regulation violations, allowing it move its scheduled maintenance to March/April next year. As many petrochemical makers plan shutdown in February-May, which would keep ethylene supplies tight during that period, Asian ethylene sellers are keeping their offer prices strong as long as they can.