Naphtha/Gasoline cracks in Asia at highest level in the month

25-Nov-11

Naphtha cracks in Asia have peaked to their highest level in a month but weak fundamentals kept the physical timespreads at parity. Traders continue to struggle with a lack of clear direction, as future Chinese petrochemical demand remained unclear to most, as per Reuters. The Asian market, that is heavily dependent on China to absorb its petrochemical excess, took a hit after Chinese importers showed limited buying interest for many months due to reasons such as monetary tightening and slower domestic demand. As a result, crackers in Taiwan, Thailand and Japan were mostly running at reduced rates to cope with weak petrochemical margins. Taiwan has not been buying spot cargoes for cracking for at least three months while Japan bought marginal volumes. The market is unlikely to strengthen unless there is a demand surge as petrochemical make rs may be keeping their feedstock inventories at low levels. As of last week, Idemitsu's crackers are running at an average rate of 70-80% after Tosoh Corp shut its vinyl chloride monomer plants near Tokuyama due to a fire. Tosoh gets its naphtha-based ethylene supplies from Idemitsu. CPC plans to shut its 380,000 tpa No. 4 naphtha cracker for a 35-day maintenance from the second week of December and will discontinue operations at its smallest of three crackers next April as planned. The price for front-month H1-January open spec naphtha eased by a dollar to US$868/ton.