FocusAsia naphtha buoyant on lack of new EU deep-sea bookings

By Felicia Loo

SINGAPORE (ICIS)--Asia's naphtha market has remained buoyant, with prices hobbling near two-week high levels and crack spreads within sight of three-month peaks, amid a dearth of fresh deep-sea arbitrage fixtures from Europe, traders said on Monday.

Second-half October naphtha was pegged at $681.50-684.50/tonne (€531.57-533.91/tonne) CFR Japan, near the $682.25-684.25/tonne CFR Japan reached on 3 September - the strongest level since 19 August, ICIS data showed.

“The arbitrage is closed,” said a trader.

A narrow East-West spread, which determines the profitability of moving regional naphtha to another, also crimped the chances of arbitrage flows, traders said.

“The spread at $12-13/tonne is far too narrow,” a second trader said.

Some 100,000-150,000 tonnes of Mediterranean naphtha would land in October, previously fixed at a spread of around $20/tonne, and that would be it, traders said.

“Europe is not short on naphtha supply but it is not long as it was used to. There has been LPG substitution and plus, a few splitters are down. Naphtha is in greater demand,” said a trader.

A lack of fresh Mediterranean arbitrage supply to Asia helped underpin prices, traders said. As propane prices reached parity with naphtha, demand for LPG feedstock also dwindled and this led to higher demand for naphtha relatively, they said

Asia’s second-half October naphtha crack spread against October ICE Brent crude futures was assessed at $108.75/tonne on Friday, after having hit a three-month high of $117.08/tonne, ICIS data showed. 

Traders attributed the price gains to prices in Europe. The European naphtha cargo market traded within a range of $655-680/tonne CIF (cost, insurance and freight) NWE (northwest Europe)  last week, and the European paper market was very active and “overbought”, according to ICIS.

Tight supply of ethylene in Asia, the basic petrochemical building block, also supported prices in this region, traders said.

Ethylene prices rose to the four-digit mark of $1,000-1,030/tonne CFR NE Asia, from month-ago levels of $890-910/tonne, ICIS data showed. Given higher ethylene prices, steam cracker margins remained attractive for many integrated players to run their plants at maximum rates.

To take advantage of current high margins, Korea Petrochemical Industry Co (KPIC) moved the planned October turnaround at its 470,000 tonne/year naphtha cracker in Onsan this year to April 2011. The exact date for the turnaround, which would last 25 days, has yet to be finalised.

“The (naphtha) crack spreads are still being supported and likely to remain so for some time. This would encourage refiners to run more light crudes/condensates,” said a trader.

($1 = €0.78)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
To discuss issues facing the chemical industry go to ICIS connect