* Japan to shut three naphtha crackers from 2014 to 2016
* Some 3 mln T of naphtha demand to be wiped out in 3 yrs
* Current naphtha outlook positive but may change next yr
By Seng Li Peng and Osamu Tsukimori
SINGAPORE/TOKYO, May 9 A series of Japanese
petrochemical plant closures starting this month will crimp
demand for naphtha in the world's No.3 economy, dragging on
regional markets for the plastic-making ingredient just as
supplies are increasing.
Oil-based naphtha can be used to make ethylene, a basic
feedstock for petrochemicals that are processed into products
such as plastics.
But about 1.3 million tonnes of ethylene capacity, around a
sixth of Japan's total, will be permanently closed over the next
two years amid a broad fall in sales of cars and other goods as
the country's population dwindles.
Japan's ageing crackers, used to produce petrochemicals from
naphtha, have also been struggling to compete with newer rivals
in South Korea and Singapore.
Traders say that would wipe out a total of some 3 million
tonnes of Japanese demand for naphtha between 2014 and 2016.
The country's total naphtha consumption in the year ended
March was around 31 million tonnes, trade ministry data showed,
with imports making up close to 60 percent of that.
"Japanese domestic demand is part of the reason (for cracker
closures), but the bigger issues are high costs and a lack of
competitiveness," said Singapore-based Alex Yap, a senior
consultant at energy research company FGE.
Declining Japanese appetite for naphtha, along with a surge
in supply as Middle Eastern refining capacity expands, could
rein in prices that, for now, are expected to stay strong for a
third year on demand from China, Asia's top petrochemicals
Profits from processing a barrel of crude into naphtha ended
2013 at a three-year peak of $115.52 a tonne and traders and
analysts expect 2014 to see similar levels.
The impact of higher supplies will be felt from 2015, after
cracker shutdowns announced by petrochemical firms gather
The permanent closure of a 392,000 tonnes per year (tpy)
cracker owned by Mitsubishi Chemical in east Japan on
May 3 is expected to have limited impact on naphtha imports
initially as the effects will be offset by reduced domestic
supply of naphtha as crude refineries go offline.
Traders said the country is expected to keep its monthly
imports of naphtha used to feed crackers at about 1.2 million
tonnes this year. That would be the second largest in Asia after
South Korea, which raised its cracker capacity between 2010 and
But the impact will be increasingly felt as two more
Japanese crackers go offline in the next two years.
Sumitomo Chemical plans to permanently shut a
415,000 tpy cracker in Chiba near Tokyo in May 2015, while Asahi
Kasei will close a 504,000 tpy cracker around April
SUPPLIES ON THE RISE
Fading demand in Japan would come against a background of
growing naphtha supplies from the Middle East and parts of Asia.
Abu Dhabi Oil Refining Co (Takreer) is expected to finish
doubling the capacity of its 415,000 barrels per day refinery by
the end of the year.
That would boost Abu Dhabi's annual naphtha exports to over
10 million tonnes per year from around 7.5 million now, traders
And South Korea's Samsung Total, SK Energy and Singapore's
Jurong Aromatics are expected to start commercial operations at
condensate splitters in the second-half of 2014. Naphtha usually
accounts for about half the products churned out by these
facilities, which 'split' very light oil into different
Meanwhile, worries over additional supply of finished
petrochemicals from the United States are mounting, with China's
top refiner Sinopec Corp scaling back billions of
dollars in petrochemical investments despite resilient demand
for plastics in the country.
U.S. shale gas crackers can produce ethylene at less than
half the cost of the naphtha-fed crackers typical in Asia,
industry experts have said.
(Editing by Joseph Radford)