FocusAsia naphtha set on a wild ride; crack gains seen limited

10 August 2012 04:42  [Source: ICIS news]

By Felicia Loo

Asia naphtha set on a wild ride; crack gains seen limitedSINGAPORE (ICIS)--Asia’s naphtha prices are likely to go on a roller-coaster ride, with gains in crack spreads expected to be capped by weak petrochemical demand and healthy supply, traders said on Friday.

Open-spec naphtha prices rose to a three-month peak of $935-938/tonne (€757-750/tonne) CFR (cost and freight) Japan on Friday morning trade, buoyed by a spike in Brent crude futures overnight, according to ICIS data.

Declining production in the North Sea and the crisis in the Middle East provided support to Brent.

“Naphtha is very volatile,” said a trader in Singapore.

Asian naphtha prices closed at $922.50-924.50/tonne CFR Japan on Wednesday, up $9/tonne from Tuesday, ICIS data showed. The Singapore oil market was closed on Thursday for a public holiday.

“The flat (naphtha) prices have increased in tandem with crude,” said another trader.

At the close of trade on Wednesday, the Asian naphtha crack spread for second-half September widened to $87.48/tonne against Brent crude futures, according to ICIS data. The crack spread was assessed at $86.65/tonne on Tuesday, compared with $96.13/tonne on 1 August, ICIS data showed.

Ethylene prices were stable at $1,130-1,170/tonne CFR NE Asia on Thursday’s close, ICIS data showed.

Ethylene customers were not under pressure to seek fresh spot cargoes, as weakness in downstream polyethylene market continued to dampen buying sentiment.

Even as Asia is expected to receive an armada of arbitrage naphtha supplies from the West totalling 500,000-700,000 tonnes in August and September, many of the cargoes have already found demand outlets because of healthy requirements for heavy full-range naphtha, traders said.

Taiwan’s CPC Corp returned to the spot market after an absence of nearly four months, having purchased by tender 30,000 tonnes of full-range naphtha for first-half September delivery to Kaohsiung. The cargo fetched a premium of $1-3/tonne to Japan quotes CFR.

Malaysia’s Titan Chemicals has bought 30,000 tonnes of heavy full-range naphtha for delivery to Pasir Gudang in the second half of September. The price was done at between a discount of $1/tonne and a premium of $1/tonne to CFR Japan quotes. In its previous purchase, Titan bought two 25,000-tonne naphtha cargoes for delivery to Pasir Gudang in the second half of August at a premium of $1.00–3.00/tonne to CFR Japan quotes.

However, some argued that buyers were not in a rush to seek cargoes while supply remained ample.

“The market is generally balanced,” said one trader.

Weighing on prices is the absence of key spot buyerTaiwan's Formosa Petrochemical Corp (FPCC) – which has no plans to seek any spot naphtha material. There is widespread expectation that FPCC would continue to skip spot purchases even for October delivery. FPCC typically buys up to 300,000 tonnes of spot naphtha every month.

Formosa has delayed resuming operations at its 700,000 tonne/year No 1 cracker in Mailiao, citing minor mechanical issues at the unit. The cracker was supposed to be restarted on 5 August following a planned turnaround that began in June.  FPCC’s 1.03m tonne/year No 2 cracker at the site will be shut on 15 August for 30 days of safety inspections and minor maintenance.

Meanwhile, naphtha buying activity from South Korean cracker operators was brisk as most of them were running their plants at 100%, traders said.

“There is also quite a lot of supply from the Middle East,” one trader said.

Qatar International Petroleum Marketing (Tasweeq) has a tender to sell spot full-range naphtha, plant condensate and gas-to-liquids (GTL) naphtha for delivery in the last 10 days of September, traders said.

The full-range naphtha and plant condensate will each be loaded in lots of 50,000 tonnes from Ras Laffan port, and the 25,000-30,000-tonne GTL naphtha parcel will be lifted from the same port.

Also, Tasweeq has a tender to sell one-year term supplies of plant condensate and full-range naphtha for October 2012 to September 2013. For each grade, 360,000-600,000 tonnes of material will be offered, out of which one cargo of 30,000 tonnes or 50,000 tonnes will be lifted by the buyer from the same port each month.

($1 = €0.81)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
Request a free ICIS sample report for the latest prices and development in the Asian petrochemical markets

By: Felicia Loo

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