In our latest naphtha market commentary:
> The Asian naphtha market is showing signs of weakening, highlighted by a decrease in the East/West (E/W) spread and a drop in MOPJ cracks, indicating a potential downward trend
> Steam cracker margins have fallen below breakeven levels in Asian for naphtha-based units, raising concerns among operators despite healthy integrated polymers margins even as new plant start-ups loom
> Some steam crackers are cutting back on operating rates with a South Korean plant planning an unannounced Q4 turnaround and a Southeast Asian facility reducing rates ahead of scheduled maintenance
> Many arbitrage opportunities to the Far East have become unprofitable due to declining Asian cash differentials and rising freight costs
> Upside price risk increases in Med FOBs as major regional refiner lowers run rates, likely reshuffling trade flows and limiting send out to the Far East
> However, naphtha paper markets are holding strong, with MOPJ and NWE cracks at multi-year highs, driven by ongoing supply concerns as refinery run cuts pile on
> The key question remains when paper and physical markets will align; we that expect to occur after refinery maintenance ebbs in late October as November cargo business gets well underway
> Upside price risk increases in Med FOBs as major regional refiner lowers run rates, likely reshuffling trade flows and limiting send out to the Far East
> However, naphtha paper markets are holding strong, with MOPJ and NWE cracks at multi-year highs, driven by ongoing supply concerns as refinery run cuts pile on
> The key question remains when paper and physical markets will align; we that expect to occur after refinery maintenance ebbs in late October as November cargo business gets well underway
