24 June 2013 04:28 [Source: ICIS news]
By Felicia Loo
SINGAPORE (ICIS)--Asia is expected to receive close to a million tonnes of deep-sea naphtha supply from the western markets in July, further compounding the heavy supply situation that has been weighing on regional prices, traders said on Monday.
Open-spec first-half August prices fell by $17.50-18.50/tonne (€13.30-14.06/tonne) from 21 June to $850-853/tonne CFR (cost & freight) on Monday morning.
The naphtha volumes expected in July – hailing from northwest Europe, the Mediterranean, Russia and the US – comprise 425,000 tonnes of fixed arbitrage shipments and 545,000 tonnes of cargoes booked provisionally, traders said.
The shipments may be more than what Asia could absorb at a time of a declining Chinese economy, traders said.
“[Naphtha] inventories are high and the [arbitrage] fixtures seem higher than Asian demand,” said one trader.
Straining the supply situation further, Indian refiners are estimated to export 750,000-800,000 tonnes of naphtha supplies in July, traders said. The volumes are slightly higher than the 750,000 tonnes shipped out this month, they added.
Lacklustre gasoline-blending demand in Europe led to earlier surplus bookings of naphtha supplies to Asia, traders said.
Naphtha is also used as a gasoline-blending component, apart from being a dominant cracker feedstock in Asia.
The naphtha price differentials in Asia are likely to weaken further because of the ample cargo availabilities, traders said.
Last week, Indian state-owned refiner Oil and Natural Gas Corp (ONGC) has sold by tender a 35,000-tonne naphtha cargo for loading from Hazira in early July, to Japanese trading firm ITOCHU. The deal for the cargo was done at a premium of $18.28/tonne to Middle East quotes FOB (free on board) for loading on 5-6 July.
ONGC previously sold by tender a 35,000-tonne naphtha cargo for loading from Hazira on 23-24 June at a premium of $26.25/tonne to Middle East quotes FOB.
There are also renewed concerns over the state of petrochemical demand in Asia, as China’s economy seems to be on a slowdown, traders said.
China’s GDP growth in the second quarter is expected to decelerate slightly from the previous quarter, according to Qu Hongbin, chief economist at investment bank HSBC.
HSBC’s preliminary China manufacturing purchasing managers’ index (PMI) dropped to a nine-month low of 48.3 in June from a final reading of 49.2 in May, because of worsening external demand, slowing domestic demand and destocking pressure.
The drop in China's PMI indicates that manufacturing activity in the world’s second-biggest economy is contracting further.
PMI is a gauge of an economy's manufacturing activity, with a reading above 50 indicating an expansion, and a lower number denoting a contraction.
($1 = €0.76)
Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
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