FocusAsia naphtha sees price uptrend as Formosa buying re-emerges

16 December 2011 04:03  [Source: ICIS news]

By Felicia Loo

Half a million tonnes of European naphtha is expected in Asia next monthSINGAPORE (ICIS)--Asia’s naphtha prices are likely to stage an uptrend until late January, supported by strong spot buying from dominant importer Taiwan and trading companies which helped to mop up voluminous deep-sea inflows for next month, traders said on Friday.

The naphtha inter-month spread widened $1/tonne (€0.77/tonne) to $7.50/tonne in backwardation, while the prompt naphtha crack spread strengthened to near $100/tonne against Brent crude futures, according to ICIS data.

“The market is heading for a hike and this will be the case until the Lunar New Year,” said a trader.

The Lunar New Year takes place on 23-24 January 2012.

“The trading companies have rushed to buy lots of spot cargoes for January. The huge arbitrage volume for January has already been absorbed into the market,” the trader added.

Asia is expected to receive half a million tonnes of arbitrage European naphtha next month, and the fact that the cargoes were placed swiftly reflected strong regional demand, traders said.

Taiwan’s Formosa Petrochemical Corporation (FPCC) bought on Thursday 150,000 tonnes of spot naphtha for second-half January delivery, its first spot purchases since August and after lifting run rates at its three crackers to 85-86% from 80-85% previously.

The cargoes were transacted at a premium of $3.00-3.50/tonne to Japan quotes CFR (cost and freight). FPCC ceased spot naphtha imports from August to mid-December because of cracker shutdown issues.

Demand from FPCC is expected to remain strong in the first half of next year, because the company has scheduled to shut its 700,000 tonne/year No 1 cracker at Mailiao for a 40-45 day turnaround in August 2012.

Meanwhile, the South Korean crackers paid higher naphtha premiums this week for spot transactions for second half of January delivery, traders said.

South Korea’s Honam Petrochemical Corp bought 75,000 tonnes at a premium of $6.00/tonne to Japan quotes CFR, while Samsung Total bought 25,000 tonnes at a premium of $6.00-6.50/tonne and LG Chem purchased 25,000 tonnes at a premium of $6.00/tonne, they said.

Last week, the spot deals were transacted lower at premiums of $4.00/tonne and $5.00/tonne to Japan quotes CFR, traders said.

Separately, the outlook on China’s petrochemical demand seems positive despite a wobbly global economy.

China's petrochemicals demand will continue to outstrip domestic supply through to 2015, said Paul Pang, managing director of chemicals consultancy Chemical Market Associates Inc (CMAI) Shanghai

Chinese demand for petrochemicals is estimated at around 110m tonnes in 2011 and is expected to grow to around 160m tonnes by 2016, while domestic supply is expected to grow from about 70m tonnes in 2011 to around 110m tonnes in 2016, according to Pang.

Demand for petrochemicals will continue growing at a high rate through to 2015, but will grow at a slower rate than the levels seen in 2006-2010 as the economy cools, Pang said.

($1 = €0.77)

Please visit the complete ICIS plants and projects database
For more information on naphtha, visit
ICIS chemical intelligence
Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections


By: Felicia Loo



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