FocusAsia naphtha market under pressure as plastics demand weakens

13 March 2013 04:06  [Source: ICIS news]

By Felicia Loo

SINGAPORE (ICIS)--Spot naphtha prices in Asia are feeling the downward pressure from weakening plastics demand, with industrial production in the key China market remaining soft, traders said on Wednesday.

Open-spec naphtha prices for the second-half April traded at $949-952/tonne (€731-733/tonne) CFR (cost and freight) Japan in the morning session, with gains of $1/tonne at the high end of the range mainly driven by the crude market, after registering a $12-13/tonne decline on Tuesday, according to ICIS.

In a sign of falling petrochemical demand, ethylene prices in the region fell to $1,300-1,320/tonne CFR NE (northeast) Asia on Tuesday, down by $10-20/tonne from the previous day and about 7% lower from four weeks ago, ICIS data indicated.

“With ethylene falling sharply, the Japanese end-users will be hesitant to buy naphtha at current premium levels,” said one trader.

Butadiene prices, on the other hand, is projected to drift below $1,800/tonne in the coming weeks after slumping by 9%, with supply outstripping demand because of a weak downstream synthetic rubber market.

On 8 March, spot BD prices were assessed at $1,860/tonne CFR NE Asia, down by $190/tonne from the previous week, according to ICIS.

A sluggish global automotive market has weakened demand for synthetic rubbers and consequently, for raw material BD.

Recent economic data out of China – the world’s second biggest economy and a major petrochemical market in Asia – further dampened market sentiment, as the country’s industrial output grew at a slower rate of 9.90% in January-February 2013, compared with 10.3% in December 2012.

There is room for the naphtha backwardation to narrow in response to the weakening fundamentals, traders said.

The spread between the second-half April and second-half May contracts narrowed to $29/tonne in backwardation on Tuesday, from $33/tonne on 11 March while the naphtha crack spread weakened to $109.71/tonne from $110.38/tonne over the same period, ICIS data showed.

Naphtha premiums, while remaining high, have softened in the latest spot transactions, traders said.

South Korea’s refiner S-Oil has sold 33,000 tonnes of light naphtha for loading in mid-April in the spot market at a premium of $48-49/tonne to Japan quotes FOB (free on board). The buyer was Japanese trading firm ITOCHU.

The cargo may head to Japan and including freight costs, the price would be about a premium of $55/tonne to Japan quotes CFR for delivery in the second half of April, traders said.

Lotte Chemical Corp, a South Korean producer, has bought 25,000 tonnes of spot naphtha supply for delivery to Yeosu in the second half of April. The deal for the cargo was done at around $26/tonne to Japan quotes CFR.

The company last bought 50,000 tonnes of spot naphtha supply for delivery to Yeosu in the first half of April at a premium of $29/tonne to Japan quotes CFR.

($1 = €0.77)

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

By: Felicia Loo

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