* Large-scale Asian processing unit outages hit demand for naphtha
* Economic slowdown is starting to dent fuel consumption
* Lower petrochemical profits also weigh on naphtha
* Graphic on slumping naphtha profits: tmsnrt.rs/2R0AfQi
By Seng Li Peng
SINGAPORE, June 10 (Reuters) - Profit margins in Asia for making the petroleum product naphtha have turned negative and are at their lowest in over decade amid a weakening global economy and tepid demand due to large-scale processing unit outages.
The benchmark naphtha margin NAF-SIN-CRK last week closed at minus $15.38 a tonne to Brent crude, the lowest since December 2008 when the financial crisis roiled the global economy.
The 124% slide in profit-margin from its March-peak makes naphtha, a petroleum feedstock used in the refining industry, the worst performing margin among all oil products.
South Korea’s LG Chem does not expect to restart its 1.3 million tonnes per year (tpy) naphtha cracker until next week after closing it last week following technical trouble.
That comes amid scheduled maintenance on a raft of processing units, or crackers, in North Asia and on top of the prolonged shutdown of Hanwha Total’s Daesan cracker in South Korea following a turnaround that started in late March.
“The naphtha market is very weak at the moment,” said Matthew Chew, principal oil analyst at IHS Markit.
“(That) is due to the several unplanned cracker outages in South Korea ... as well as peak cracker maintenance season ... leading to lacklustre demand.”
Chew said a plunge in prices for liquefied petroleum gas (LPG), a competing feedstock fuel, was also putting downward pressure on naphtha.
A weakening global economy, which has started to dent oil and fuel demand growth, is weighing on industry profits as well.
“Over the past week or so our economists have revised down their GDP growth outlook for the U.S., China, India and Brazil,” Barclays bank said on Monday in a note about the economy and its impact on oil demand.
“These countries account for more than three-fourths of our oil demand growth assumptions for this year and the revisions imply a 300,000 barrels per day reduction in our current global oil demand outlook of 1.3 million barrels per day ... for this year, the British bank said.
Falling margins in the petrochemical industry which uses naphtha as a feedstock were also weighing on naphtha margins.
“The ethylene-naphtha spread is now around $350 a tonne, about half of what it was some three months ago,” said Sri Paravaikkarasu, director for Asia oil at energy consultancy FGE.
Ethylene is a building block for plastic and is the product most commonly made at most petrochemical facilities.
Paravaikkarasu said “naphtha cracks should receive some relief from the full return of crackers from maintenance” later in the northern hemisphere summer, but added that “the recovery path will be slow”.
Reporting by Seng Li Peng in SINGAPORE; Additional reporting by Jane Chung in SEOUL; Editing by Henning Gloystein and Joseph Radford