Japanese petrochemical companies have concluded term naphtha deals for open spec grade, loading over January-December 2018, with trading companies at higher differentials of plus USD 1-5 per ton to the Mean of Platts Japan naphtha assessments, up by around USD 5 per ton from January-December 2017. The differentials were concluded at discounts for January-December 2017. The naphtha supply and demand fundamentals tightened in 4Q17 because demand firmed amid strong cracking margins. Steam crackers in the region have been running at full capacity. The CFR Northeast ethylene prices have been hovering around USD 1,300 per ton since September, leaving more than USD 300 per ton of cracking margins to petrochemical companies. LPG prices stayed relatively high in the fourth quarter, and petrochemical companies could buy only a limited volume of butane as a substitute of naphtha. This was one of the factors the tightened the supply. As a result, term contract prices for naphtha supplied by the Middle Eastern countries jumped for 2018. Kuwait Petroleum Corp. has sealed term contracts with Asian end-users and traders for its December 2017-November 2018 naphtha cycle at higher premiums than the previous contract. Meanwhile, the premiums which Japanese end-users fixed with trading companies did not rise as much as FOB contracts with the Middle Eastern suppliers because the market does not expect the supply tightness to last for the entire year of 2018. Japan has a total ethylene production capacity of 6.155 mta, and it exported 16.7 million ton of naphtha for petrochemical use in 2016, according to data from the Ministry of Finance.