OUTLOOK ‘08: Asia naphtha bull run to slow

24 December 2007 03:49  [Source: ICIS news]

AsiaBy Nurul Darni

SINGAPORE (ICIS news)--Asia’s naphtha market may tread on a softer note in 2008 from heavier cracker turnarounds planned in the northeast in the second half, traders said on Monday.

Asia's naphtha bull run of the past few months in 2007 is also expected to slow in the year ahead due to expectations of more Western arbitrage cargoes heading East in the first quarter.

“Asia has seen the strongest performance in 2007 and thanks to current high (naphtha prices), the region is drawing more cargoes from Europe and the Mediterranean,” a Tokyo-based naphtha trading manager said.

Open spec naphtha prices in Asia had been hitting fresh highs this year, largely due to crude’s record-breaking rally. It peaked at an all-time high of $880/tonne CFR (cost and freight) Japan by mid-December.

Naphtha prices in the West, in contrast, have weakened gradually and could continue to fall in the first quarter of 2008 as European refiners raised output after completing their turnaround season, said a Northeast Asian trader.

Asian cracker operators (excluding China) are bracing themselves for a relatively heavy turnaround programme in 2008 with 18 units scheduled for maintenance. Japan, Asia’s largest olefins supplier, will undergo at least seven naphtha cracker turnarounds in 2008 compared to six this year.

Helping to partly offset the tight supply caused by Japan, South Korea’s shutdown schedule is comparatively light. Only two cracker turnarounds have been scheduled in 2008 compared with five this year.

A spanner in the works would be from India, as it still has the propensity to export huge volumes of spot naphtha on a monthly basis, traders said.

Asia has seen rising naphtha exports from India in late 2007, with volumes reaching as high as 1m tonnes for September and October loading respectively. But for November and December loading, Indian exports declined to less than 1m tonnes as domestic naphtha consumption from India’s power plants surged.

But more European naphtha arbitrage supplies could still flow into Asia to make up for the reduced Indian naphtha exports, traders said.

($1 = €0.70)

By: Nurul Darni
65 6789 4359

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