Asia's naphtha price was nearly at a month high on Monday while cracks were around their highest in 1-1/2 weeks. But traders said the stronger cracks were supported by the higher naphtha price, which was in turn lifted by firm raw material crude costs and not fundamentals.
Premiums paid by South Korea's Honam for around a total of 100,000 tonnes of open-spec grade naphtha reiterated the weak sentiment, they added. The petrochemical maker bought two cargoes for second-half November arrival at Yeosu at about $1.25 a tonne premium to Japan spot quotes on a cost-and-freight (C&F) basis.
It bought another two cargoes for the same arrival period at Daesan at premiums of about $2.00 a tonne. The premiums it paid for Yeosu were lower compared with what YNCC had paid last Friday for 50,000 tonnes at $1.75. "The market failed to rebound, defying earlier expectations that it would," said a trader.
Taiwan's Formosa has delayed the restart of its 1.2 million tonnes per year (tpy) No 3 cracker to either late Monday or Tuesday this week from early October following a planned maintenance which started in mid-August. "Even if they restart, it is unlikely they will buy spot naphtha for November. They have been buying a fair bit of liquefied petroleum gas (LPG) instead," said another trader.
LPG can be used to partially replace about 5-15 percent of naphtha used in some Asian crackers. Gasoline cracks were firm with the supply crunch still persisting although some expect it to ease soon as peak demand season in Asia is over and as Shell has restarted another crude distillation unit (CDU) at its fire-hit Singapore plant.