Asia naphtha gains on strong buying momentum, supply concerns

13 July 2012 12:01  [Source: ICIS news]

By Samuel Wong

SINGAPORE (ICIS)--Spot naphtha prices in Asian gained $18.00/tonne (€14.76/tonne) this week to a six-week high of $843.00-845.00/tonne at the close of trade on Friday, on strong demand from regional cracker operators amid concerns that supply might tighten in the near term, market sources said.

Over the past three weeks, naphtha values shot up by 21% or $146.50/tonne from a 21-month low on 22 June, according to ICIS.

But the gains may not be sustainable in the long-term given that demand for downstream petrochemicals is fundamentally weak, they said.

The open-spec Asian naphtha contract for the second half of August rose stood at $843.00-845.00/tonne CFR (cost & freight) Japan on Friday, according to ICIS.

The naphtha crack spread versus August Brent crude futures was also at a six-week high of $82.98/tonne, up 6.45% from the previous week, ICIS data showed.

The crack spread at $80/tonne levels is not very high, but it is at a “comfortable level”, a northeast Asian producer said.

Basing on the current market for ethylene and propylene, it is not a “wrong decision” to ramp up production at crackers to full rates to enjoy better margins, the producer said.

Buying interest during this week has improved, supporting naphtha prices at higher levels, but this is only likely to remain in the short-term, a Singapore-based trader said.

There still remains much uncertainty in the market as it largely depends on the global macroeconomic situation and how soon demand in the downstream petrochemical markets would pick up, the trader said.

A number of market players are concerned that petrochemical margins will deteriorate once again if naphtha prices continued to rise at a more brisk pace compared with those of downstream products.

Even if demand for downstream petrochemicals were to strengthen, it will only be for a brief period, a South Korea-based cracker operator said.

On Friday, spot ethylene were quoted at $1,060-1,080/tonne CFR NE (northeast) Asia, compared with $1,040-1,060/tonne CFR NE Asia last week. Butadiene, on the other hand, was at above $2,400-2,500/tonne NE Asia on 13 July from last week’s levels of $2,300-2,400/tonne NE Asia, according to ICIS.

India’s Essar Oil sold 25,000 tonnes of naphtha for loading from Vadinar on 29 July-2 August to Glencore at a premium of $15/tonne to Middle East quotes FOB (free on board).

India’s Bahrat Petroleum Corp (BPCL) has sold 35,000 tonne naphtha cargo loading from 10-12 August from Mumbai to Total Oil Trading SA (TOTSA) at a premium of $20/tonne to Middle East quotes FOB.

BPCL also sold a similar-sized cargo of naphtha to trading firm Cargill for early-August loading from Kochi at a premium of about $26/tonne on FOB Middle East quotes basis.

State-owned Bangladesh Petroleum (BPC) sold by tender 170,000 barrels of naphtha loading from Chittagong on 16-18 July to Trafigura at a discount of $1.40/bbl to Singapore quotes FOB.

South Korea’s Honam Petrochemical booked a 25,000-tonne cargo for second-half August delivery to Yeosu, and another similar-sized cargo to Daesan at premium of $4.00-4.50/tonne to Japan quotes CFR.

In addition, the company bought a 25,000-tonne cargo for second-half August delivery to Yeosu, at a premium of $8.00/tonne to CFR Japan quotes. Two similar-sized cargoes for first-half September delivery to Yeosu and Daesan were bought at a $5.00/tonne premium and $5.50/tonne premium, respectively, based on a 45-day pricing formula.

South Korea’s LG Chem has bought at least 25,000 tonnes of open-spec naphtha for second-half August arrival at Yeosu. The cargo fetched a premium of $7.50/tonne to Japan CFR quotes, more than double the premium fetched in its previous purchase.

Concerns about higher premiums and tighter supply in the weeks ahead have prompted buyers to purchase cargoes earlier, a Singapore-based trader said.

Physical demand for naphtha will increase, as some crackers are ramping up production to almost full rates, another Singapore-based trader said.

($1 = €0.82)


By: Samuel Wong



AddThis Social Bookmark Button

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly

ICIS news FREE TRIAL
Get access to breaking chemical news as it happens.
ICIS Global Petrochemical Index (IPEX)
ICIS Global Petrochemical Index (IPEX). Download the free tabular data and a chart of the historical index

Related Articles