21 December 2012 02:21 [Source: ICIS news]
By Felicia Loo
SINGAPORE (ICIS)--Asia’s naphtha prices are expected to be supported next year by higher spot demand as the turnaround schedule at regional crackers is much lighter compared with the previous years, traders said.
In the first quarter, naphtha supply from the Middle East will tighten because of refinery maintenance and this will further underpin naphtha prices in Asia, they said.
Cracker turnarounds in Asia in 2013 will affect around 2.82m tonnes of ethylene capacities, just a fifth of the 13.24m tonne/year capacities that were shut for maintenance in 2012, according to ICIS.
This meant firmer spot naphtha demand, as well as a stable-to-higher pool of ethylene supply, traders said.
“The lower rate of turnarounds in cracker in this region will support prices,” said one trader.
Moreover, positive Chinese economic data provides an impetus to plastics demand in Asia, traders said.
HSBC’s December purchasing managers’ index (PMI) for China rose to a 14-month high at 50.9, indicating a further improvement in manufacturing activities in the world’s second biggest economy and a major importer of petrochemicals in Asia.
China manufacturing PMI from HSBC was 50.4 in November. A figure above 50 indicates an expansion, while a figure below 50 represents a contraction.
At the close of China’s recent two-day Central Economic Work Conference in Beijing, policy makers pledged to maintain steady economic growth in 2013. The conference was held on 15-16 December.
The policy makers, led by the new chief of the Communist Party of China, Xi Jinping, pledged to strengthen and improve macroeconomic regulations to ensure sustainable development.
China will maintain positive fiscal and prudent monetary policies, and will aim to provide structural tax incentives to different industries, raise limits of bank loans for companies and keep the China currency stable, according to the policy makers.
China's GDP is predicted to grow by 8.2% in 2013, according to the Chinese Academy of Social Science (CASS). The projected growth is acceleration from the 2012 target of 7.5% expansion.
Asia’s naphtha prices may receive a boost from the prospects of inventory build-up ahead of the Lunar New Year holiday that will take place on 9-15 February 2013 in China, traders said.
Polyethylene (PE) buyers’ inventory was low as many traders and end-users have been maintaining low inventories this year because of the uncertain global economic outlook, market participants said.
Spot naphtha demand from end-users will be high given a positive outlook on plastics consumption, traders said.
Reflecting expectations of a firmer naphtha market, the forward price spread between the first half of March and the first half of April contracts stood in a steep backwardation of $14.75/tonne (€11.21/tonne), ICIS data showed.
Tempering these gains will be heavy deep-sea naphtha flows from Europe, traders said.
($1 = €0.76)
Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
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