FocusAsia’s end-users roll over naphtha deliveries to April

07 March 2013 02:11  [Source: ICIS news]

By Felicia LooAsia’s naphtha retreats from hikes, backwardation weakens

SINGAPORE (ICIS)--A handful of Asian petrochemical producers have rolled over their naphtha deliveries to April from March, signalling a downtrend in the naphtha market, traders said on Thursday.

Falling ethylene prices undermined confidence in the market, which saw the recent spikes in the prices of the naphtha feedstock followed by the swift ebb, they added.

Asian ethylene prices fell by $40.00-50.00/tonne (€30.80-38.50/tonne) at the close of trade on 6 March to $1,330-1,350/tonne CFR (cost & freight) NE (northeast) Asia, according to ICIS data.

Ethylene prices were weaker compared with four weeks ago when prices were assessed at $1,380-1,420/tonne CFR NE Asia, the data indicated.

In response to the collapse of the downstream methyl ethyl ketone [MEK] market late last week, Asian naphtha prices fell earlier in the week to $948-950/tonne CFR Japan before rebounding on 6 March to $966-968/tonne CFR Japan on the back of crude oil futures support.

However, on 7 March morning, naphtha prices fell to $960-963/tonne CFR Japan for the second-half April contract, triggered by overnight losses in global crude futures.

“Some end-users are rolling inventory from March to April,” said one trader, adding that this came at a time when huge arbitrage volumes will be flowing into Asia from the Western markets.

Asia will receive 1.3m tonnes of deep-sea naphtha material from northwest Europe, the Mediterranean, Russia and the US in March. A similar volume of western arbitrage supply is also expected for the month of April.

Meanwhile, India’s refiners are exporting around 600,000 tonnes of naphtha in March, up from 500,000 tonnes shipped out in February.

The spot premiums concluded in the week were also weaker, reflecting the market conditions.

South Korea’s Lotte Chemical Corp bought 50,000 tonnes of spot naphtha supply for delivery to Yeosu in the first half of April. The deal for the cargo was done at a premium of $29/tonne to Japan quotes CFR.

Lotte previously bought 75,000 tonnes of spot naphtha supply for delivery to Daesan and Yeosu in the first half of April at a premium of around $35/tonne to Japan quotes CFR.

Following Lotte’s deal, South Korea's Samsung Total bought 25,000 tonnes of naphtha for delivery to Daesan in the second half of April at a weaker premium than Lotte’s purchase, traders said.

Samsung last purchased a 25,000 tonne naphtha cargo in the spot market for delivery to Daesan in the first half of April, at a premium below $40/tonne to Japan quotes CFR.

The naphtha crack spread was valued at $115.50/tonne to Brent crude futures at the close of trade on 6 March, compared with $151.18/tonne in the previous week, ICIS data showed.

The intermonth spread between second-half April and second-half May contracts stood at a backwardation of $24/tonne, down from $36/tonne over the same period, it stated.

Naphtha prices were robust last month, mainly propped up by the increase in cracker run rates by Japanese end-users who were in turn enticed by the strength of the ethylene market then, traders said.

Japan’s chemical exports excluding pharmaceuticals rose by 9.7% in January 2013 from the previous month, official data from the Ministry of Economy, Trade and Industry (METI) showed on 6 March. Domestic shipments of chemicals increased by 0.5% month on month, according to the ministry.

Moving forward, some traders do not exclude the possibility of cracker run cuts since the downstream petrochemical demand starts to taper off.

“There is no shortage of [naphtha] supply. Now suddenly the reality comes out,” said one trader.

($1 = €0.77)

By: Felicia Loo

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