FocusAsia naphtha seen balanced as demand counters hefty supply

24 August 2012 06:08  [Source: ICIS news]

By Felicia Loo

SINGAPORE (ICIS)--Asia naphtha market is seen getting balanced, with rising spot demand likely to offset an armada of Western deep-sea imports, traders said on Friday.

Open-spec naphtha prices in Asia surged to almost a four-month high of $974.50-976.50/tonne CFR (cost and freight) Japan on Thursday, tracking a rally in global crude futures then.

However, prices eased during the morning trade on Friday to $964-967/tonne CFR Japan, in tandem with crude futures, according to ICIS data.

“The arbitrage cargoes are overdone. The east-west spread is no longer workable,” said a trader, referring to the fact that it was not economical to bring European naphtha to Asia at this juncture.

Asia is estimated to receive around 500,000-700,000 tonnes of arbitrage naphtha from northwest Europe and the Mediterranean in August and September, and the surplus is still seeking demand outlets in Asia as buyers are not in a frenzied rush to secure cargoes, traders said.

However, there are some pockets of demand from northeast Asia as crackers in South Korea are being operated at 90% and above, while the rates for some crackers in Japan are 80% or more, traders said.

“There is a bit of demand out there,” said a trader, adding that fresh demand has helped improve price premiums in the latest South Korean spot purchases.

South Korea’s Honam Petrochemical has bought four naphtha cargoes totalling 100,000 tonnes for delivery into Yeosu and Daesan in the first half of October at higher prices, on the back of rising spot demand.

Honam paid a premium of around $2/tonne to Japan quotes CFR. The company previously bought a 25,000 tonne naphtha cargo for delivery into Yeosu in the second half of September at a discount of 50-75 cents/tonne to Japan quotes.

Honam is currently operating its two crackers at 100% of capacity.

The company runs a 1m tonne/year cracker in Yeosu and another 1.07m tonne/year cracker in Daesan.

Earlier this week before the run-up in prices, South Korea’s LG Chem bought by tender 75,000 tonnes of naphtha for delivery into Yeosu in the second half of September at around a discount of $1/tonne to Japan quotes CFR, traders said.

The likelihood of a brief cracker shutdown of the Mitsui Chemicals also helped support the naphtha market to some extent, they said.

Japan’s Mitsui Chemicals plans to restart its 617,000 tonne/year naphtha cracker in Chiba by 28 or 29 August following power supply cut on 21 August.

The downstream units are likely to be restarted on 25-27 August.

Meanwhile, ethylene prices were firm at $1,250-1,290/tonne CFR NE Asia as compared with $1,100-1,140/tonne CFR NE Asia four weeks ago, ICIS data showed.

China imported higher volumes of most petrochemical products in July, with significant increases seen for methyl ethyl ketone (MEK), butadiene (BD) and butyl acrylate (butyl-A), according to China Customs data.

Naphtha imports climbed by 42% year on year and 85% month on month to 243,920 tonnes in July, while BD imports grew by 711% year on year or 149% month on month in July to 34,664 tonnes, the data showed.

However, despite such positive data, the market remains wary considering the global economic headwinds, traders said.

HSBC’s August flash purchasing managers’ index (PMI) for China fell to a nine-month low of 47.8, indicating another month of contraction in manufacturing output.

The flash PMI number for August was 1.7 points lower than July’s 49.5, HSBC said. A figure above 50 indicates an expansion, while a figure below 50 represents a contraction.

($1 = €0.80)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Felicia Loo

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