Japanese ethylene output hits 6-mth low on naphtha price spike

Quantum Commodity Intelligence - Japanese ethylene production in January fell to a six month low, data from the Japan Petrochemical Industry Association showed on Thursday, as soaring naphtha prices caused cracker margins in the world's second-largest producer to turn negative.

Output in January slumped to 507,500 mt, equivalent to 16,370 mt a day and down by over 2,200 mt a day from a month earlier – its sharpest month-on-month fall since the start of the pandemic.

January's output was the third-lowest since late 2020 and fell below the five-year average for the month of 18,130 mt a day.

Japanese crackers were forced to cut run rates at the start of the year as the ethylene-naphtha spread fell well below the theoretical break-even level for non-integrated producers, with more slashing run rates this month.

The spread was last pegged at around $175/mt by market sources, compared to the breakeven level of $350/mt.

Naphtha CIF Japan spot prices rallied to a multi-year high of $858/mt on February 14, up over $115/mt since the start of the year, Quantum data showed, amid a slowdown of shipments from Europe which is short of naphtha amid high petchem demand and extended refinery maintenance.

Meanwhile, total Japanese aromatics production in January came off December's high as crackers moved away from liquid cracking in favour of gas – which produces lesser amounts of aromatics.

Combined benzene, toluene, ad xylene production hit 864,900 mt in January, or 27,900 mt a day – its lowest since October and in line with production levels in January last year.

Yet production levels remained below pre-pandemic levels and compared to the 2015-2019 average of 36,590 mt a day for January.

Petrochemical plants can either crack naphtha or gas to create the building blocks of plastics and other products, with more liquid cracking producing greater amounts of aromatics and less ethylene.