Asia's naphtha prices, margins hit 2014 highs on demand growth, costly LPG

LOTTE CHEMICAL

21/10/2021 08:36

(Repeats to additional clients with no change to text)
    * New crackers, costly LPG to drive Asia's naphtha imports
    * Asia naphtha deficit to widen by 2-2.27 mln T in 2022 

    By Mohi Narayan
    NEW DELHI, Oct 21 (Reuters) - Asia's naphtha prices and
refining margins jumped to their highest since 2014 propelled by
strong demand growth for the petrochemical feedstock and as
alternative liquefied petroleum gas (LPG) becomes expensive amid
a global power crunch.
    LPG prices from the United States, Middle East and Europe
have jumped by roughly a third in the past three months to their
highest since 2014 on economic recovery and a global power
crunch, pushing Asian petrochemical makers to import more
naphtha from the Middle East and West.
    Asia is the top consumer and importer of naphtha, used to
make plastics and textiles, dilute heavy crudes and sometimes as
a fuel. More ethylene crackers are coming online next year
across Asia, which will widen the region's naphtha deficit
further and increase imports by more than 2% in 2022, analysts
said.
    "The naphtha deficit will remain strong in first quarter as
LPG remains priced out of Asian and European crackers," Armaan
Ashraf, consultant at consultancy FGE said.
     Global naphtha demand has exceeded pre-COVID-19 levels this
year by about 400,000 barrels per day (bpd), the International
Energy Agency said in its latest monthly report.
    That fuelled a 30% rebound in Asia's benchmark naphtha
prices  NAF-1H-TYO  since Aug. 20 to $795 per tonne on Oct. 18,
the highest since 2014, while refiners' margins for producing
the light distillate from Brent  NAF-SIN-CRK  also hit a 2014
high of $152.78 a tonne, Refinitiv Eikon data showed.
    
    NEW CRACKERS
    There will be 2.05 million tonnes per year (tpy) of
additional ethylene capacity online by the end of the first
quarter of 2022, according to analysts.
    South Korea's Hyundai Oilbank Corp's  INPTVH.UL 
joint-venture with Lotte Chemical  011170.KS  will start
operating its 850,000-tpy cracker by end-2021, while India's
HPCL-Mittal Energy Ltd (HMEL) plans to start its 1.2 million-tpy
cracker at Bathinda refinery in northern Punjab by end-March
2022, industry sources told Reuters.
    With growing demand, consultancies Energy Aspects and FGE
expect Asia's naphtha import deficit to widen by 2 million to
2.27 million tonnes (49,000-56,000 bpd) in 2022, while crackers
could continue to shun more expensive LPG feedstock in the
near-term.
    Asia's naphtha demand is forecast to grow by 8.56 million
tonnes to 204.39 million tonnes in 2022 from this year, while
supply will grow by 6.3 million tonnes to 140.4 million tonnes,
according to Energy Aspects.
    "Asian naphtha balances will tighten by 2.27 million tonnes
year-on-year to 64 million tonnes in 2022, as demand increases
continue to outpace rising supply," Energy Aspects' analyst
Ciaran Tyler said.
    FGE expects Asia's naphtha deficit to widen by 50,000 bpd in
2022, Sri Paravaikkarasu, director for Asia oil, said.
    "As we see Middle East naphtha surplus increasing next year,
we should see more inflows coming into Asia," she said, adding
that additional barrels will also come from the West.
    Middle East naphtha exports to Asia have averaged around
3.48 million tonnes per month this year, higher than the
pre-pandemic level of 3.19 million tonnes per month in 2019,
Refinitiv data showed.

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Asia naphtha prices climb to multi-year highs on strong demand,
higher LPG costs    https://tmsnrt.rs/3nbfQbL
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 (Reporting by Mohi Narayan; Editing by Florence Tan & Simon
Cameron-Moore)
 ((Mohi.Narayan@thomsonreuters.com;))