Asia naphtha inter-month contango widens further

13 May 2008 04:20  [Source: ICIS news]

SINGAPORE (ICIS news)--Asian naphtha inter-month contango has widened further to minus $2.75 (€1.76) due to weak buying interest from northeast (NE) Asian end-users, industry sources said on Tuesday.

The spreads between second half of June and second half of July in the CFR (cost and freight) Japan naphtha market had narrowed to parity early last Friday from $3/tonne early last week. It subsequently flipped into contango of $1/tonne late Friday during the trading session.

The spreads seen at minus $0.75/tonne to parity on Monday, have widened by $2/tonne to minus $2.75/tonne, reflecting sudden bearish sentiments in the market due to the outage at three off Yeochun Naphtha Cracking Center’s (YNCC) crackers last week.

"The situation was balanced in May and June, but the outage suddenly changed everything, resulting in excess supply," a source said. Also, such high prices of naphtha are keeping buyers at bay, another source added.

Last week, Asian naphtha prices broke the $1,000/tonne record level.

Restarted on 6 May, YNCC’s 850,000 tonne/year No 1 naphtha cracker was producing on-spec material but was shut down again on 12 May because of problems in the tower (of the cracker). It was expected to be down for at least three days.

YNCC had said that it would ramp up operating rates at its No 2 and No 3 crackers to 100% on Tuesday, and expected to run both crackers at maximum operating rate by Wednesday.

The plants had been down due to a power outage since 3 May. YNCC had to shut down all three of its crackers,

YNCC had deferred an estimated 100,000 tonnes of naphtha slated for May-June delivery as well as a similar volume from June to July.

($1 =  €0.64)

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By: Desmond Chia
+65 6780 4359

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