Rising Asian naphtha prices open arbitrage for European cargoes

18 August 2010 10:47  [Source: ICIS news]

SINGAPORE (ICIS)--Asia may soon get more naphtha supply from Europe following an increase in regional prices amid rising demand for the petrochemical feedstock, traders said on Wednesday.

About 100,000–150,000 tonnes of Mediterranean naphtha could land in Asia in October, they said.

Benchmark naphtha prices in Asia have risen to $682/tonne (€532/tonne) CFR (cost & freight) Japan, up from $614/tonne CFR Japan in the same month-ago period, ICIS data showed.

Arbitrage players were scouting for more naphtha cargoes, with the east-west spread locked in at some $20/tonne, said traders.

“The spread is not very wide. The arbitrage window, in fact, is quite marginal. But if you can get cheap cargoes from the Mediterranean, it’s workable,” said a trader.

Around 200,000 tonnes of naphtha landed in Asia from Europe during the last arbitrage window in June, they added.

“Based on how FOB (free on board) east prices are going, the arbitrage window is open from the Mediterranean,” said another trader.

While the bulk of Asian crackers were operating at full rates, a supply deluge in the West has prompted arbitrage cargoes to move eastwards, traders said.

Ethylene prices were valued at $920–950/tonne CFR northeast Asia on 17 August, up from $830–850/tonne in the same month-ago period, according to ICIS data.

However, western naphtha prices ended $32/tonne lower on 13 August to $638–640/tonne CIF (cost, insurance & freight) cargoes Mediterranean.

($1 = €0.78)

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By: Felicia Loo

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