Naphtha jumps on crude hike, petchems subdued

12 March 2008 04:51  [Source: ICIS news]

SINGAPORE (ICIS news)--Naphtha prices jumped about $5/tonne at the start of Wednesday’s trades while limited reaction was seen in the downstream petrochemicals markets in response to the overnight increases to crude values, industry sources said.

Crude futures were trading slightly lower on Wednesday morning in Asia after surging to new record highs close to $110/bbl on Tuesday as speculators shifted further funds into the commodities markets.

The rapid crude price rise was curtailed later on Tuesday after the US Federal Reserve and other central banks released fresh funds into the credit markets which served to drive up the US dollar and push crude off record levels.

At 03:00 GMT on Wednesday, April NYMEX light sweet crude futures were trading at $108.70/bbl, down $0.05/bbl on Tuesday’s settlement price.

On Tuesday, the April NYMEX contract had hit a new intra day all time high of $109.72/bbl.

At the same time on Wednesday, April ICE Brent futures were trading at $105.05/bbl, down $0.20/bbl on the previous close. April ICE Brent futures had peaked to a new record $105.82/bbl on Tuesday.

On Wednesday morning, trading commenced with naphtha prices increasing sharply by about $5/tonne. Second half April price indications were pegged at $918.75-921.75/tonne CFR (cost and freight) Japan, first half May at $916.50-919.50/tonne CFR Japan and second half May at $914.25-917.25.00/tonne CFR Japan

But limited impact of the continuing uptrend in crude and naphtha values percolated to downstream petrochemicals markets.

In the aromatics market, trading was slow with prices stable-to-firm during the morning session.

Benzene prices were largely stable at $1,070-1,080/tonne FOB (free on board) Korea and an offer was heard at $1,100/tonne FOB Korea, indicating the interest among sellers to push up the price, but this met with a bid at $1,070/tonne FOB Korea for a big berth any April loading parcel.

The Asian toluene market was $5/tonne firmer at $1,000-1,005/tonne FOB Korea and nearing its all-time record high of  $1,000-1,010/tonne FOB Korea.

A bid was heard at $1,000/tonne FOB Korea for any April loading, with no offers in sight, but traders and producers said that prices were likely to breach the record high levels soon.

Paraxylene (PX) offers were also higher at $1,265/tonne CFR Taiwan for April, but no deals were heard concluded yet amid the bullish mood.

Several major titanium dioxide (TiO2) producers have hiked their Asian contract offers by $120-150/tonne for the second quarter due mainly to the surge in crude and raw material costs, producers said, with one producer adding, “With crude soaring higher and higher, and raw material costs rising, we have no option but to raise prices,”.

Asian styrene prices were mostly unchanged from Tuesday with buy-sell indications for April parcels posted at $1,415-1,435/tonne FOB Korea.

In China, offers of bonded tank material were stable at $1,450/tonne CFR, LC (letter of credit) 90 days and domestic parcels were quoted at yuan (CNY) 11,650/tonne ex-tank unchanged compared to yesterday’s close.

The propylene market continued to be cautious with market players emphasizing it was the supply situation that decided price direction for now.

“There are no big changes in market situation now. The feedstock naphtha prices had been high and cracker operation margins squeezed since February, so the sentiment remains the same despite the record crude prices,” a Korean trader said .

Integrated cracker operators with downstream polyolefin plants were better buffeted from the increase in feedstock cost due to the robust polyolefins market though some exporters of olefins such as SK Energy and Nippon Oil had to reduce rates due to the poor economics of selling olefins.

“We have not cut operation rates and are still considering whether to reduce rates in April. Our downstream polypropylene (PP) plant is still enjoying good profits and running full,” an integrated Korean cracker operator said.

Offers for ethylene di-chloride (EDC) were on the rise and were heard at around $440/tonne CFR China compared to prices assessed at the close of last week at $420-430/tonne CFR China with a Taiwanese producer saying that the $20-25/tonne increases were due to surging crude values.

In southeast Asia, a similar increase was seen as EDC offers were heard at $450/tonne CFR SE Asia compared to $425-435/tonne CFR SE Asia at the close of last week.

In the alternative fuels market, escalating crude and gasoline values have increased ethanol demand in the Brazil and US markets which has resulted in ethanol export offers from Brazil jumping more than 15% in the last four weeks.

Asian ethanol prices have firmed to above $600/tonne FOB Asia on surging crude and high agricultural feedstock values.

James Dennis, Anu Agarwal, Kew Jia Hui, Clive Ong, Prema Viswanathan, Ng Hun Wei, Salmon Aidan Lee and Desmond Chia contributed to this article. 

By: Mahua Chakravarty
+65 6780 4359

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