15 June 2010 06:04 [Source: ICIS news]
By Felicia Loo
SINGAPORE (ICIS news)--Asia’s naphtha crack spread - which struck a near three-week low - could face further downward pressure as regional crackers might cut runs to combat shrinking downstream petrochemical prices, traders said on Tuesday.
The crack spread of the petrochemical feedstock naphtha spiralled down to $105.13/tonne (€86.21/tonne) against Brent crude futures on Monday, the weakest since 27 May when the crack spread stood at $103.43/tonne, according to global chemical market intelligence service ICIS pricing.
“There are high (petrochemical) inventories in China. With new crackers emerging in the Middle East, the olefins market will become worst. The market has a bearish view (on naphtha) until the end of the year,” said a trader.
As China was awash in supply, Asian ethylene prices tumbled to $900.00-950.00/tonne CFR NE Asia from $1280-1300/tonne CFR NE Asia last month, ICIS pricing data showed.
End-users in northeast Asia were already scaling back spot naphtha purchases, traders said.
Compounding the situation, the financial turmoil in Europe meant that Asia would be a dumping ground for Western naphtha supplies, they said.
As much as 1.4 million tonnes of European naphtha was expected to land in Asia between second-half May and first-half July, traders said.
On signs of rising supply, the Egyptian General Petroleum Corporation (EGPC) offered by tender 25 cargoes of full-range naphtha, or a total of 875,000 tonnes, for loading between July and December.
On the other hand, tepid naphtha demand had squeezed prices in the spot market, which was evident in latest purchase made by South Korea’s Honam Petrochemical. Honam bought by tender 75,000 tonnes of naphtha for second-half July delivery, at a premium of $1.00/tonne to Japan CFR (cost and freight) quotes, lower than the expected premium of $2.00-3.00/tonne.
Asia’s naphtha intermonth spread weakened to $3.00/tonne from $9.00/tonne last month, prompting cracker operators to consider lower run rates, traders said.
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