30 November 2012 05:01 [Source: ICIS news]
By Felicia Loo
SINGAPORE (ICIS)--Spot naphtha premiums in Asia are likely to slide further, weighed by growing supply and subdued petrochemical demand, traders said on Friday.
A slew of spot deals were done at lower premiums in the week, suggesting a tepid market, they said.
The region will be receiving around 900,000 tonnes of deep-sea naphtha flows from Europe and the US in December, at a time when end-users prefer to buy minimum supply and to keep low inventories.
In response to the rising supply, the intermonth spread between the first half of January and the first half of February contracts weakened to $10.00/tonne (€7.70/tonne) in backwardation – the lowest since 27 August, ICIS data showed.
At midday, the open-spec naphtha prices for the first half of January stood at $952.00-955.00/tonne CFR (cost & freight) Japan.
South Korea’s Honam Petrochemical bought 100,000 tonnes of spot naphtha supply for delivery to Yeosu and Daesan in the first half of January, at a premium of $9.50/tonne to Japan quotes CFR.
In its previous purchase, Honam bought 50,000 tonnes of open-spec naphtha for delivery to Yeosu at a premium of around $16/tonne to Japan quotes CFR.
Two other South Korean producers bought first-half January naphtha cargoes at weaker premiums.
Yeochun NCC (YNCC) bought 75,000 tonnes of spot naphtha supply at a premium of $8.50-9.00/tonne to Japan quotes CFR, while LG Chem bought 50,000 tonnes of spot naphtha at premiums of $8.50-9.00/tonne.
Meanwhile, YNCC will be reducing operating rates at its three crackers in Yeosu to 90% in December from 100% in November because of weak margins, with a possibility of further cuts in run rates. The company has three crackers at the site with a combined ethylene capacity of 1.9m tonnes/year.
Naphtha export tenders from India were also being concluded at lower premiums, traders said.
India’s Reliance Industries Ltd (RIL) sold by tender 55,000 tonnes of naphtha for loading from Sikka on 24-28 December, at a premium of $31.50/tonne to Middle East quotes FOB (free on board), they said.
In its previous tender, Reliance sold 55,000 tonnes of paraffinic naphtha for loading from Sikka on 10-15 December, at a premium of $47.50/tonne to Middle East quotes FOB.
The decline in naphtha premiums indicates continued softness in demand for petrochemicals.
“The margins are weak,” one trader said.
In the week ended 23 November, margins for naphtha-based ethylene in northeast Asia sank to $30/tonne from $82/tonne in the previous week, because of a $65/tonne drop in ethylene prices and a 0.2% fall in co-product credits, according to ICIS weekly margin ethylene report.
The fall in margins was cushioned slightly by a 0.6% decline in naphtha costs. Co-product credits fell mainly on lower values for butadiene and propylene, the report stated.
Ethylene prices were assessed at $1,170-1,190/tonne CFR NE Asia on 29 November, versus $1,310-1,340/tonne CFR NE Asia four weeks ago, ICIS data indicated.
($1 = €0.77)
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