By Seng Li Peng SINGAPORE, Nov 12 (Reuters) - Unipec is importing naphtha to fill shortfalls in China, a rare move that will sustain the bull run in the petrochemical feedstock market driven by North Asian crackers ramping up runs, traders said on Friday. The world's No. 2 energy consumer is plagued by a diesel crisis, after factories rushed to buy the fuel to fire up electricity generators after the government cut power supplies to meet a self-imposed end-2010 deadline to save energy. This prompted the country's major refineries to optimise diesel yield at the expense of naphtha, tightening supplies of the light fuel of which China is net short, even as they run their oil plants at full blast. Unipec, trading arm of top Chinese oil firm Sinopec , has bought at least three medium-range cargoes of 30,000 tonnes each, for fourth-quarter delivery mainly into Eastern China, five traders said. It is also seeking at least another 55,000 tonnes for December delivery. The Chinese trader had also imported 70,000-80,000 tonnes of diesel for November delivery due to the supply crunch. "The unexpected demand from Unipec has sustained the naphtha strength despite arbitrage cargoes coming in," said a North Asian trader. Cracks, premiums/losses obtained from refining Brent crude into naphtha, neared a two-week high on Friday at $153.40 a tonne, keeping up the year-long strength in a market that rebounded from historical lows of minus $189.75 in November 2008 during the financial crisis. But current levels are still below the year's peak around $178 a tonne in mid-January. Sinopec has petrochemical plants across China including Shanghai, Ningbo, Maoming and Guangzhou that need naphtha feedstocks to keep its crackers running at normal rates. "Sinopec was talking about cutting runs at some of its crackers in October by 25 percent to around 75 percent capacity due to shortage in feedstock," said an industry source. "But we cannot be sure if run cuts took place after that." SHORT-TERM SUPPORT Some traders expect the naphtha market to remain robust through first-quarter 2011, but any moves by the Chinese government to ease its power sector curbs after the deadline would help cool down the heated market. "China will likely continue to buy and stockpile for first-quarter as safety measures," said a trader. The bullish sentiment has drawn at least 85,000 tonnes of naphtha for December arrival from Europe and the United States to Asia after a two-month absence, while Syrian cargoes have been streaming in since the third quarter. In total, some 150,000 tonnes will land in Asia in December from Europe, Syria and the U.S. and traders estimated that volume could double to 300,000 tonnes given the strong regional demand. "But these are mainly heavier grades. What we need is more paraffinic grades," said another trader. Heavy naphtha is usually ideal for aromatics production, while paraffinic, or lighter grades, are for use as feedstocks in crackers. China flipped into a net importer of naphtha last year following an increase in the number of petrochemical plants. Imports were usually made by Fujia Dahua Petrochemical, a privately run firm owned by Dalian Fujia Corp and Dahua Group and Qingdao Lidong Chemical Co, a joint venture majority owned by GS Aromatics, part of South Korean-listed GS Holdings . In 2009, China was net short of nearly 1.8 million tonnes of naphtha, and up to January-September 2010, it was net short of close to 1.2 million tonnes, or an average of 133,000 tonnes a month. Traders said if China were to keep up its incremental imports through early next year, they would have to compete for cargoes with South Korean petrochemical makers. LG Chem and Samsung Total are expanding cracking capacities next year to capitalise on recent strong margins, while SK Energy will restart a 200,000 tonne-per-year (tpy) cracker this month after a two-year shutdown. (Editing by Ramthan Hussain) ((firstname.lastname@example.org; +65 6870 3086; Reuters Messaging: email@example.com)) Keywords: NAPHTHA CHINA/UNIPEC IMPORTS (If you have a query or comment on this story, send an email to firstname.lastname@example.org) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved.
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