Asian naphtha faces lacklustre demand from Korea

09 April 2008 09:48  [Source: ICIS news]

SINGAPORE (ICIS news)--Demand for naphtha weakened in Asia this week as relatively high costs and poor margins from downstream derivatives kept Korean cracker operators at bay, industry sources said Wednesday.

 

In a reversal of the strong demand seen last week, Korean end-users had mostly covered their May requirements and the few who have not were deferring purchases this week till prices soften, market sources said.

 

Naphtha prices for the second half of May contract was assessed at $922.00-923.00/tonne CFR (cost and freight) Japan on Tuesday, up $3.50/tonne over Monday. The gain of 0.38% was more than overshadowed by the gains of 1.76% in the Brent crude markets over Tuesday.

 

Forward month prices were also relatively firm, with first half of June and second half of June contracts both traded at $919.00/tonne CFR Japan on Tuesday, which meant that the backwardation for the back months is crunching due to anticipated weak demand in June from end-users.

 

Some of the northeast Asian end-users had been trying to increase their usage of liquefied petroleum gas (LPG) as a feedstock instead of naphtha.

 

“Demand for naphtha from end-users in Europe was also weak. The situation is further exacerbated by lacklustre demand for mogas in Europe and US,” sources added.

 

Korean cracker operators such as SK Energy, YNCC and Samsung Total Petrochemical had indicated plans to cut operating rates due to poor cracking economics. Other crackers such as Lotte Daesan and Korea Petrochemical Industry Co (KPIC) have scheduled turnarounds in April and May, further dampening demand for naphtha.

 

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By: Desmond Chia
+65 6780 4359

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