Most naphtha crackers unscathed in Japan’s quake crisis

By Peh Soo Hwee and Felicia Loo

SINGAPORE (ICIS)–Most naphtha crackers in Japan are up and running in the wake of the deadly earthquake, although a few are operating at reduced rates, while crackers near the epicentre remain shut, company and industry sources said on Monday.

Demand for the petrochemical naphtha feedstock is expected to fall significantly, with second-half April contracts dropping to $984-987/tonne (€708-711/tonne) CFR (cost & freight) Japan on Monday – the weakest since 1 March, according to ICIS data.

“It’s very bearish news. Our hearts go out to the people in Japan,” said one trader.

The world’s third largest economy is in a state of emergency after the northeastern part of the country was hit by the deadly quake and tsunami on 11 March, with 10,000 feared dead. The authorities are also battling a nuclear emergency, amid fears of multiple reactor meltdowns at plants damaged in the quake.

“Everyone is waiting for a clear picture. There will be changes to the ports of delivery for some (naphtha) cargoes,” another trader said.

Plants owned by JX Nippon Oil & Energy, Maruzen Petrochemical and Mitsubishi Chemical were taken off line on Friday, with no restart in sight (see table below for cracker status).

“I don’t care how long it will remain shut,” said one industry source, expressing grief at the crisis.

JX Nippon Oil & Energy left its 460,000 tonne/year naphtha cracker at Kawasaki in Kanagawa prefecture idle after the devastating quake, while Maruzen Petrochemical shut its 520,000 tonne/year naphtha cracker at Chiba.

Mitsubishi Chemical shut its Kashima-based crackers – its 375,000 tonne/year No 1 naphtha cracker and its 453,000 tonne/year No 2 naphtha cracker. However, the company is keeping its 500,000 tonne/year naphtha cracker running in Mizushima.

Other Japanese producers cut operating rates at their crackers. Mitsui Chemicals reduced the operating rate at its 617,000 tonne/year naphtha cracker in Chiba but the exact production levels were not immediately known. 

Sumitomo Chemical is running its 415,000 tonne/year naphtha cracker in Chiba at a reduced rate of 70%.

Chiba prefecture, which was affected by the earthquake, is one of Japan’s petrochemical hubs.

Meanwhile, power supply rationing is expected in the affected regions and is likely to further cripple supply of downstream products, traders said.

Ethylene and propylene spot prices in Asia could spike in the coming weeks amid the shutdowns, although negotiations were largely placed on the backburner as market players assessed the impact on Monday, traders said.

“Prices could increase due to several non-deliveries out of Japan,” said an olefins trader.

The country exported around 480,000 tonnes of ethylene in 2010, down from 587,897 tonnes in 2009, traders said.

Ethylene was assessed at $1,300-1,330/tonne CFR northeast Asia last week but no outright bids and offers had emerged so far.

As for propylene, selling ideas were maintained in the high $1,500s/tonne CFR NE Asia for end-March/early April arrival cargoes, although market participants expected a tightening in supply from the country in the coming weeks.

“There is some talk that C3 (propylene) may be short but the market is still reorganising itself,” said another olefins trader.

Spot propylene prices were traded at $1,530-1,560/tonne CFR NE Asia last week.

Separately, crackers located away from the epicentre are operating as usual. Japan’s Tosoh Corp is operating its 527,000 tonne/year naphtha cracker at Yokkaichi in Mie prefecture at 100% and plans to shut the plant for a regular turnaround later this month.

Below is the operating status of naphtha crackers in Japan

($1 = €0.72)

Please visit the complete ICIS plants and projects database
Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections