UpdateAsia naphtha, aromatics surge on crude

09 June 2008 10:10  [Source: ICIS news]

By Serene Cheong

(Updates with information on equities in paragraphs 14, 15, 16 and 19)

SINGAPORE (ICIS news)--Downstream naphtha and aromatics markets in Asia opened strongly on Monday as they played catch-up with front-month July NYMEX crude contract prices, which settled at a fresh high of $138.54/bbl late last week.

Naphtha was $61.50/tonne (€39/tonne) higher, with second-half July indications pegged at $1,158.00-1,161.00/tonne CFR (cost and freight) Japan, first-half August at $1,154.50-1,157.50/tonne and second-half August at $1,151.50-1,154.50/tonne.

In the aromatics sector, benzene was up $25-30/tonne to $1,300-1,310/tonne FOB (free on board) Korea. A bid heard for a big berth any July loading cargo at $1,300/tonne, with no offer heard.

Asian toluene also climbed $45/tonne to $1,255-1,265/tonne FOB Korea with an offer heard at $1,300/tonne against a bid at $1,255/tonne for July loading.

For paraxylene (PX), notional buying indications were $30/tonne higher at $1,590-1,600/tonne CFR Taiwan for any July cargoes, but no firm offers were heard.

In the styrene monomer (SM) market, prices were lifted about $20-40/tonne from last Friday with the bid-offer range for July cargo pegged at $1,650-1,680/tonne FOB Korea.

SM traders were also optimistic about the further upside potential as inventories in the key Chinese market remained low and demand from downstream expandable polystyrene (EPS) sector was robust due to the building of temporary houses in quake-hit Sichuan.

The impact of crude’s rally also filtered down to the plastics industry as ethylene vinyl acetate (EVA) producers such as Formosa Plastics Corp raised July offers for a second time this month, citing high feedstock costs.

A fresh hike of $30/tonne for the 18% VA content grade to $2,445-2,450/tonne CFR China/southeast Asia for July loading cargoes was announced by the producer after a $20/tonne price increment was implemented last week.

“We have no choice as we are led by crude gains and we understand the downstream converters are also being squeezed,” a company official said.

“But we have no intention to give way on our prices due to our short supply so the markets may have to wait for a recession before the prices correct,” he added.

In the alternative fuels sector, the surge in crude oil also boosted the appeal of biodiesel as a substitute to traditional fuels, underpinning upstream vegetable oil prices.

Benchmark crude palm oil (CPO) futures on the Bursa Malaysia traded at ringgit (M$) 3,682/tonne ($1,140/tonne) at 11:00 local time (03:00 GMT), M$82/tonne up from Monday's opening.

Regional equity markets, too, were not spared as indexes in Asia plummeted on fears of lower economic growth and consumption in the US.

In northeast Asia, Japan's Nikkei 225, Taiwan's Taiex and South Korea's Kospi closed lower by 2.13%, 1.80% and 1.27% respectively. Southeast Asian indexes such as the Straits Times Index and Kuala Lumpur's KLSE ended Monday 1.99% and 1.41% weaker, while India's Sensex plummeted 3.75%. 

Although automobiles and transportation were the hardest hit sectors, firms dealing with oil and petrochemicals did not escape unscathed as the stock prices of major producers such as Nippon Oil, LG Chemical and PTT Chemical traded 1.20%, 1.74% and 2.70% lower on concerns of squeezed margins and inability to pass on higher costs to downstream consumers.

In India, petrochemical giant ONGC also saw a 5.81% cut in its share prices while stocks of Reliance Industries traded 3.73% lower on higher feedstock costs and weak sentiments caused by an explosion at its linear light density polyethylene (LLDPE)/high density PE (HDPE) swing plant in Nagothane.

Crude, meanwhile, retreated slightly after Friday’s sharp gains. It eased $0.77/bbl to $137.85/bbl on Monday after settling at a fresh high of $138.54/bbl on Friday.

The jump in crude oil prices was attributed to the weakening dollar on the back of a US government report which indicated that the unemployment rate was the highest in almost two decades.

Israel’s announcement that an attack on Iran’s nuclear facilities seemed unavoidable due to the failure of sanctions contributed further to market jitters on the back of investment bank Morgan Stanley’s forecast that crude may reach $150/bbl within a month.

($1 = €0.63/M$3.23)

Desmond Chia, Mahua Chakravarty, Clive Ong, Helen Lee, Cheong Su Yeen, Jeremiah Chan and Isha Jha contributed to this article
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By: Serene Cheong
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