20 July 2012 10:54 [Source: ICIS news]
By Ong Sheau Ling
SINGAPORE (ICIS)--Spot naphtha prices in Asia hit a 10-week high on Friday, buoyed by strong physical demand for August as regional crackers ramp up production, while refinery outages in Japan and lower export volumes from India shaved supply, market sources said.
At the close of trade on Friday, the first-half September naphtha contracts were assessed at $890.00-892.00/tonne (€720.90-722.52/tonne) CFR (cost and freight) ?xml:namespace>
Market sentiment is bullish as premiums on tenders and spot August purchases are on the rise, traders said.
South Korean cracker operators settled purchases at premiums that were 33-56% higher than last week. Indian refiners also closed tenders at higher premiums, up 7-18% from the previous week.
“Higher run rates at crackers will mean more demand for naphtha,” a Singapore-based trader said.
Among the Asian cracker operators that bought spot cargoes this week are
Apart from the regular buyers, industry players are expecting
The affected Mizhushima-based refinery supplies naphtha feed to Mitsubishi Chemicals and Asahi Kasei’s crackers, while the affected Chiba-based refinery supplies feed to its downstream cracker, to Mitsui Chemical’s cracker to a small extent, traders said.
Major regional naphtha exporter Reliance Industries Ltd (RIL), meanwhile, has been staying off the market this month, further reducing availability of the spot material in
“Healthy [naphtha crack] spread and good product margins are supporting the [naphtha] prices,” a South Korean trader said.
For the week ended 13 July, ethylene margins were assessed at $226/tonne, up $15/tonne from the previous week, according to ICIS.
On 20 July, the naphtha crack spread versus September Brent crude futures was at $88.73/bbl, up slightly from the previous day. The spread was off the two-month high of $93.43/bbl that was hit on 18 July, but a marked improvement from a three-and-a-half year-low of $3.27/bbl recorded on 13 July, according to ICIS.
The widening of the inter-month spread is also a consequence of the bullish market.
The inter-month spread between the first-half September and first-half October contracts was assessed at $11.50/tonne – a 10-week high – on Friday, according to ICIS.
The speed and magnitude of the price increase, however, are worrying regional cracker operators and traders.
Prices have jumped $193.50/tonne or 28% from its 20-month low at $697.50/tonne CFR Japan on 22 June to reach $891.00/tonne CFR Japan on 20 July, ICIS data showed.
Lacklustre petrochemical demand from Asia’s largest consumer –
On 20 July close, spot ethylene prices were $10/tonne higher week on week at $1,070-1,090/tonne
The third quarter is expected to see limited spot purchases from
FPCC has enough naphtha stocks to last up to September, and is heard to be buying liquefied petroleum gas (LPG), an alternative and cheaper feedstock to naphtha.
Another Taiwanese producer CPC is likely to skip spot purchases in the current quarter as it has ample supply, market sources said.
“The price upside may only last for a few more weeks, on the condition that energy values stay strong,” another
($1 = €0.81)
Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
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