13 June 2013 05:15 [Source: ICIS news]
By Felicia Loo
SINGAPORE (ICIS)--Excessive cargo availability will continue to weigh on the Asian naphtha market, raising the possibility of a further decline in premiums on spot transactions, and a swing to discounts on some deals, traders said on Thursday.
Spot naphtha price differentials have weakened this week given the region's bloated supply despite stable-to-firm gasoline blending demand, and stable-to-soft petrochemical usage, they said.
On Thursday morning, open-spec naphtha prices for the second half of July delivery rose to $866.50-869.50/tonne (€649.88-652.13/tonne) CFR (cost and freight) Japan, up by $3.50-4.50/tonne from Wednesday because of overnight crude oil gains.
Asia, being a net importer of naphtha, tends to require around 800,000 tonnes of arbitrage naphtha each month. However, the surplus June-delivered arbitrage supplies from the western markets were too much, resulting in a spill-over of deliveries to July, traders said.
“The prompt supply is too long,” said one trader.
Another trader added: “It’s obviously oversupplied in June up to the first half of July in the east.”
For June, 1.1m-1.15m tonnes of deep-sea western naphtha supply were expected to arrive in Asia, with some of the second-half June volumes to be delivered in the first half of July instead, traders said.
The inflows will hail from northwest Europe, the Mediterranean, Russia and the US. Meanwhile, around 800,000 tonnes of arbitrage naphtha have been booked for July arrivals, they said.
“We have a lot of arbitrage cargoes in June,” said one trader.
Some cargoes may end up distressed given the demand outlets are not enough to absorb the supply, hence leading to a squeeze in price differentials.
In addition, there are renewed concerns over an economic slowdown in China, that will chip away the demand for plastics as the country is the world’s biggest factory, traders said.
China released some economic data over the weekend indicating that the world’s second largest economy is showing more signs of slowing down.
Its May export growth rate came in at just 1%, while the market was expecting a figure around 7%. The country’s official manufacturing purchasing managers index (PMI) for May inched up to 50.8% from 50.6% in April, while its non-manufacturing purchasing managers’ index declined to 54.30% from 54.50% in April.
Spot naphtha deals during the week showed the strain on price differentials.
South Korea’s Yeochun NCC (YNCC) has purchased two spot naphtha cargoes totalling 50,000 tonnes for delivery to Yeosu at a low-single premium, reflecting a bearish naphtha market.
The cargoes for delivery in the second half of July fetched a premium of $1.50/tonne to Japan quotes CFR. YNCC last bought by tender around 400,000 tonnes of term naphtha supply for the period from July 2013 to June 2014, at a premium of $7.75/tonne to Japan quotes CFR.
Another South Korean firm Lotte Chemical has bought 25,000 tonnes of full-range naphtha for delivery in the second half of July at a premium of $3.50/tonne to Japan quotes CFR. It purchased another 50,000 tonnes at a premium of $4.50/tonne to Japan quotes CFR for delivery to Daesan.
Lotte previously bought 25,000 tonnes of spot naphtha supply for delivery to Yeosu in the first half of July, at a premium of $10.50/tonne to Japan quotes CFR.
Malaysia’s Titan Chemicals, on the other hand, has bought 55,000 tonnes of spot full-range naphtha for delivery to Pasir Gudang on 11-15 July, at a discount of 50 cents to Japan quotes CFR.
Titan Chemicals previously bought by tender 120,000-130,000 tonnes of term naphtha supply for delivery to Pasir Gudang from July 2013 to June 2014, at a premium of around 75 cents/tonne to Japan quotes CFR on a 45-day pricing basis.
BPCL sold 35,000 tonnes of naphtha for loading from Kochi on 5-8 July at a premium of $27.00/tonne to Middle East quotes FOB, as well as 38,000 tonnes of naphtha for loading from Mumbai on 13-15 July at a premium of $26/tonne to Middle East quotes FOB.
The company previously sold by tender two naphtha cargoes totalling 73,000 tonnes for loading from Mumbai in June.
To Unipec, BPCL sold 38,000-tonne cargo for loading on 11-13 June at a premium of $32.00-33.00/tonne to Middle East quotes FOB. BPCL also sold a 35,000-tonne parcel to Shell at a premium of around $28.00/tonne to Middle East quotes FOB for loading on 28-30 June.
($1 = €0.75)
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