26 August 2011 05:42 [Source: ICIS news]
By Felicia Loo
SINGAPORE (ICIS)--Asia’s naphtha backwardation is likely to strengthen on expectations that Taiwanese Formosa Petrochemical Corp (FPCC) would restart its long overdue 700,000 tonne/year No 1 naphtha cracker at Mailiao sometime in September, traders said on Friday.
The time spread between the first-half October and first-half November contracts was assessed at $6/tonne (€4.20/tonne) on Thursday, the strongest since 16 May when the inter-month spread was at $7/tonne, according to ICIS.
The naphtha crack spread versus October Brent crude futures was valued at $135.60/tonne, up by $6.35/tonne on the previous week.
“Naphtha is on an uptrend. Demand is outpacing supply. The market is heartened with ?xml:namespace>
FPCC is expected to restart the No 1 naphtha cracker in September, with the unit's unplanned shutdown pushing on its fourth month.
FPCC had shut the No 1 cracker for inspections following a pipeline fire at the firm’s Mailiao petrochemical complex on 12 May.
FPCC shut the refinery and related units entirely because of a fire in end-July.
“The market seems to be strong because supplies are getting tighter. The arbitrage window is closed given a weak east-west spread. And
The east-west spread was at a weak level of $4.90/tonne, a far cry from at least $27/tonne that would enable arbitrage economics to work, they added.
“There is less (ethanol) output in
Amid the tight supply situation in
Indian refineries are curbing naphtha exports for September amid several plant turnarounds, with naphtha shipments being reduced to 850,000 tonnes from levels at above 900,000 tonnes in August, traders said.
Reflecting a bullish market, a series of spot tenders garnered strong premiums.
South Korea's LG Chem bought 75,000 tonnes of open-spec naphtha for delivery in the first-half of October, at premiums of $4.50/tonne and $5.00/tonne to Japan quotes CFR (cost & freight).
Indian refiner Oil and Natural Gas Corp (ONGC) has sold by tender 35,000 tonnes of naphtha for loading from Hazira on 11-12 September at a premium of $21-22/tonne to Middle East quotes FOB.
India’s Reliance Industries Limited (RIL) sold 55,000 tonnes of naphtha to trading firm Itochu for loading from Sikka on 10-20 September at Middle East quotes FOB plus $21/tonne.
Meanwhile, Qatar International Petroleum Marketing (Tasweeq) has sold by tender 50,000 tonnes of plant condensate and 30,000 tonnes each of full-range naphtha and Pearl GTL (gas-to-liquids) naphtha for loading in September, at premiums of $19-22/tonne to Middle East quotes FOB, traders said.
In its last tender, Tasweeq sold 25,000-30,000 tonnes of Pearl GTL naphtha, 50,000 tonnes of plant condensate and 50,000 tonnes of full-range naphtha for August at a premium of $12-13/tonne to Middle East quotes FOB for loading from Ras Laffan.
“Downstream (petrochemical) prices are holding. I don’t see why naphtha can’t be bullish,” said one trader.
Additional reporting by Lester Teo
($1 = €0.70)
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