09 December 2011 07:08 [Source: ICIS news]
SINGAPORE (ICIS)--Asia’s naphtha prices will stay firm in December, supported by the expectations of fresh spot demand from ?xml:namespace>
In line with the strong prices, the naphtha spread between the contracts for the second half of January and the second half of February widened to $5.50/tonne (€4.13/tonne) in backwardation from parity a month ago, ICIS data showed.
The naphtha crack spread versus Brent crude futures nearly tripled from the levels seen in early November to above $90/tonne on the close of trade on 8 December, the data showed.
“The demand for heavy grade naphtha is strong and there isn’t much supply available,” a trader said, adding that the premium for heavier grade naphtha was more than $10/tonne.
South Korea’s Honam Petrochemical bought 25,000 tonnes of naphtha for delivery into Daesan in the first half of January at a premium of $4/tonne to Japan quotes CFR (cost & freight) earlier in the week, while LG Chem subsequently bought supplies for delivery into Yeosu in the second half of January at a wider premium of $5/tonne, the traders said.
“Supply is tight for January, especially for the first half of the month,” a third trader added.
The rising naphtha prices in Asia, which increased to above the $900/tonne CFR Japan level seen this week, have sparked off a rally in the east-west spread, boosting the opening of the arbitrage window to bring in barrels from
The east-west spread strengthened to $21.72/tonne on 8 December from $21.02/tonne on the close of 7 December, the traders said. The spread was at $10.49/tonne four weeks ago, they added.
For December, around 150,000 tonnes of deep-sea Western naphtha will be shipped to
Meanwhile, a recovery in butadiene (BD) prices, which are supported by limited supply and production cuts, is boosting the naphtha market, the traders added.
Spot BD prices continued to increase, rising to above $2,100/tonne
The BD prices, which were assessed at $1,570-1,650/tonne CFR NE Asia four weeks ago, drew support from increased Chinese demand and limited availability.
FPCC has raised the operating rates at its three naphtha crackers to meet a stronger demand from its downstream derivative products. The company operates a 700,000 tonne/year No 1 cracker, a 1.03m tonne/year No 2 unit and a 1.2m tonne/year unit in Mailiao. “The market is hopeful,” a fourth trader said.
($1 = €0.75)
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Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
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