Price and market trends: Asia naphtha gets lift from tight supply

08 February 2013 10:08  [Source: ICB]

The recent period of unusually strong demand for European naphtha, and the resulting tight market conditions, are likely to persist for around two months, sources said. And Asia naphtha is showing strength on stronger demand and tight supply.

"My call is that this [strength in Europe naphtha] can last until the end of March," a trader said on 31 January. "In April/May, Middle Eastern and Asian refineries should come back from turnaround and a lot of gas should come from the US."

 
Two other traders agreed that this exceptional period of high demand could indeed last several weeks.

This represents a significant change for the European naphtha market, which is structurally long and normally plagued by subdued requirements.

Tightness has arisen as a result of open arbitrages, both to Asia and the US, and healthy demand from the gasoline sector.

Furthermore, for many weeks - and very unusually for the winter - rival feedstock propane has been priced significantly below naphtha. This has rendered it the first choice for petrochemical buyers with the option to choose between feedstocks.

Asia's spot naphtha premiums are expected to be shored up by tightening supply of the petrochemical feedstock and strong demand from the end-users amid high cracker run rates, traders said.

Both South Korean Yeochun NCC (YNCC) and Samsung Total bought a total of 75,000 tonnes of spot naphtha supply in the week ended 1 February at premiums of $22/tonne (€16/tonne) and at premiums of $23-24/tonne, respectively, against Japan quotes CFR (cost & freight).

The cargoes are scheduled for delivery in the first half of March.

"The end-user demand from South Korea is strong. Supply is tight from India," said a trader.

CRACKERS AT FULL TILT
Having raised the operating rates at its three Yeosu-based crackers to 100% in January from 90% in December, YNCC will continue to run the crackers at full tilt in February.

YNCC's three crackers at the site have a combined nameplate ethylene capacity of 1.9m tonnes/year.

Compounding the supply situation, Asia may face lower deep-sea naphtha inflows from Europe where a gasoline arbitrage opening to the US is bolstering the purchase of naphtha for gasoline blending.

Already some of the deep-sea naphtha from Europe was being rolled over to delivery in the first half of March from late February because of poor previous weather conditions, traders said.

Asia's open-spec naphtha prices closed at $999.00-1,001.00/tonne CFR Japan on 31 January - the highest since 14 September 2012.


By: Felicia Loo



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