FocusAsia naphtha stays buoyant on petchem stockpiling, short supply

24 January 2013 06:27  [Source: ICIS news]

By Felicia Loo

Asia naphtha stays buoyant on petchem stockpiling, short supplySINGAPORE (ICIS)--Asia’s naphtha prices will be buoyed in the weeks ahead by Chinese end-users' stockpiling of petrochemicals ahead of the Lunar New Year holiday, stripping off the limited feedstock supply in the region, traders said on Thursday.

Naphtha is the main feedstock for petrochemical production in Asia.

At noon, the open-spec first-half March naphtha contract rose by $1.00/tonne at the upper end of the range to $989.50-992.50/tonne (€742.13-744.38/tonne) CFR (cost & freight) Japan. Asian naphtha prices are currently at their highest levels since 17 September 2012, ICIS data showed.

On 23 January, the naphtha crack spread against March Brent crude futures strengthened to $147.80/tonne – the highest level since 26 December 2012 – from $111.06/tonne in the previous day, ICIS data showed.

The spread between the first half of March and the first half of April contracts widened $1.00/tonne from 22 January to $18.00/tonne in backwardation on Wednesday, according to the data.

“Supply is tighter because of low Indian exports,” said a trader in Singapore.

Reflecting strong demand and tighter supply, South Korea’s LG Chem bought 75,000 tonnes of spot naphtha for delivery in the first half of March at higher premiums, traders said.

LG Chem bought two 25,000-tonne cargoes for delivery to Daesan at a premium of $18-19/tonne to Japan quotes CFR over a 30-day pricing period. One 25,000-tonne cargo for delivery to Yeosu was purchased at a premium of $11.50/tonne to Japan quotes CFR over a 45-day pricing period, they said.

The South Korean company previously bought 50,000 tonnes of spot naphtha for delivery from the second half of February to early March, at a premium of $9.00/tonne to Japan quotes CFR.

Meanwhile, LG Chem is operating its two crackers – a 940,000 tonne/year unit in Daesan and a 1m tonne/year unit in Yeosu – at full capacity this month and will continue to do so in February, a company source said.

Spot naphtha premiums strengthened in response to the sharply lower Indian exports, as well as the postponement of deep-sea naphtha deliveries from Europe, traders said.

India will continue to ship out low volumes of naphtha in February, with the quantity estimated to be 500,000 tonnes – lower than the 600,000 tonnes exported in January and far weaker than the country’s usual monthly average exports of 800,000-900,000 tonnes, traders said.

Its January naphtha exports were earlier estimated to be 800,000 tonnes, but the actual shipment volume turned out lower because of refinery maintenance works and a fire incident at a Hazira-based gasoline storage tank.

Meanwhile, Asia is facing a delay in deep-sea naphtha shipments from Europe and the US because of poor weather conditions. Naphtha deliveries were postponed from the second half of February to the first half of March.

At least 500,000 tonnes of arbitrage naphtha from the western markets were initially expected to arrive in Asia from the second half of February.

Low shipments from India and delays in the entry of arbitrage cargoes into Asia led to high premiums being fetched on spot naphtha sales.

India’s Reliance Industries Ltd (RIL) sold a total of 90,000 tonnes of spot naphtha for loading from Sikka next month.

A 55,000-tonne paraffinic naphtha cargo for loading on 15-20 February was sold to Japanese trading firm Itochu, at a premium of $42.50/tonne to Middle East quotes FOB (free on board).

Reliance also sold a 35,000-tonne cargo of heavy naphtha for loading on 3-7 February to an end-user, at a premium of around $40/tonne to Middle East quotes FOB.

The Indian producer previously sold a 35,000-tonne spot naphtha cargo for loading from Sikka on 27-31 January to Total, at a premium of $38.00-40.00/tonne to Middle East quotes FOB.

Indian state-owned refiner Oil and Natural Gas Corp (ONGC) sold by tender a 35,000-tonne naphtha cargo for loading from Hazira on 9-10 February, to Japanese trading firm Idemitsu. The deal for the spot cargo was done at a premium of $43.50/tonne to Middle East quotes FOB.

Demand wise, Japan’s naphtha imports for ethylene production rose by 5% to 1.25m tonnes in December 2012 compared with the previous month, official data showed.

Chinese end-users are also stocking up on petrochemical products ahead of the week-long Lunar New Year holiday next month, shoring up demand for naphtha, traders said.

The Chinese market will be closed on 9-15 February.

China imported 357,251 tonnes of naphtha in December 2012, up 60% from a year earlier, according to official customs data.

($1 = €0.75)

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

By: Felicia Loo

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