China’s Cnooc and Shell Petrochemicals Co. (CSPC) achieved on-specification production at its Huizhou steam cracker on Saturday following a late-April restart, OPIS reported, citing multiple sources. The plant has annual capacity for 1.2 million tonnes of ethylene and 600,000 tonnes of propylene. It had shut in March as an Iran-related supply shock left Asian producers short of feedstocks. CSPC had not responded to OPIS’s request for comment when the report was published.
The return to production points to a gradual recovery from disruption around the Strait of Hormuz, although the passage remains largely inaccessible, according to the report. Producers have sourced replacement supplies outside the Middle East to meet immediate requirements while the US and Iran pursue peace talks. CSPC’s flexible cracker depends mainly on imported naphtha, with the Middle East accounting for more than half of Asia’s supply.
Cnooc was observed moving condensate from its Australian joint-venture project to Huizhou in April. Industry sources linked the shipments to the naphtha shortage, although that explanation was not confirmed. Condensate can be run through splitters to produce naphtha. Sources also said a temporary US waiver covering sanctions on Russian cargoes could help import-dependent crackers, alongside domestically purchased feedstocks.
Other Chinese operators are considering higher throughput. Sources told OPIS that the Tianjin Nangang Ethylene Project was weighing an increase in its May cracker operating rate to 80%, from 70%, after securing sufficient feedstock outside the Middle East. CSPC’s restart also coincides with higher Chinese ethylene shipments to Southeast Asia amid excess domestic supply.
Asian physical naphtha pricing already reflects easing supply pressure, OPIS data showed. Its assessed CFR Japan cash differential stood at $70 a tonne on Wednesday, half the earlier shortage-driven peak. The benchmark CFR Japan open-specification naphtha price fell $71 a tonne to $971 a tonne that day. Meanwhile, the premium for second-half June over second-half July delivery narrowed from more than $100 a tonne to $66 a tonne, indicating reduced tightness for prompt supplies, though the market remained in backwardation.