Asia naphtha prices are expected to firm in early 2011, stoked by robust global crude futures at above US$91/bbl as a bitter cold winter in Europe and northeast USA sparks demand for home heating, as per ICIS. Refinery maintenance planned in the Middle East is expected to drain naphtha shipments to Asia in the next few months, at a time when Asian refineries are ramping up distillate production to meet peak heating oil consumption in the northern hemisphere. Naphtha may continue its bull run for the next few months (in Q1-2011), until a slew of planned cracker plant turnarounds in Q2. Abu Dhabi National Oil Company (ADNOC) plans to shut a 140,000 bpd condensate splitter for a month from mid-January. Saudi Aramco is expected to slash naphtha exports to Asia by half a million tons in H1-2011 due to refinery maintenance in Rabigh and Jubail. But naphtha crackers in Asia are likely to keep high run rates.
Petrochemical margins are expected to remain okay especially for integrated crackers. Integrated polypropylene (PP) margins were valued at US$126/ton in the fourth quarter to date, vs US$111/ton in the third quarter, according to ICIS weekly margin report.
If the current cold wave in the northern hemisphere lasts longer than expected, refineries in Europe will continue with higher output of diesel, leading to lower naphtha arbitrage to Asia. Naphtha demand is estimated to dwindle in Q2-2011 as cracker turnarounds become heavier. The turnaround season would start in February, with majority of the shutdowns in Japan and South Korea concentrated in March, April and May. 19 crackers are slated for turnarounds in 2011, according to data obtained by ICIS. This translates to a production loss of more than 1 mln tons of ethylene in 2011. Korea Petrochemical Industry Co (KPIC) is planning a 25-day shutdown at its 470,000 tpa cracker in Onsan, while Samsung Total would have a longer turnaround at its 850,000 tpa Daesan cracker from end-April to early June. LG Chem’s 760,000 tpa cracker and Yeochun NCC’s 857,000 tpa ethylene plant are also slated for turnaround.
The turning point for naphtha will be end of February. February market will be strong but following that, the cracker turnarounds will hit naphtha demand.
03-Jan-11 
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