Price and market trends: Asia naphtha prices poised to fall

28 June 2013 09:59  [Source: ICB]

Market flooded by deep-sea inflows from Europe, the Mediterranean, Russia and the US

Asia naphtha prices may slide on the back of a regional supply glut and modest demand from crackers, traders said on 18 June.

The naphtha crack spread weakened to a one-month low of $88.03/tonne against Brent crude futures at the close of trade on 17 June, down by 2.4% from 14 June.

The spread between the first half of August and the first half of September naphtha contracts narrowed by 50 cents from 14 June to $5.50/tonne in backwardation on 17 June, the data indicated.

"From the second half of June to July, the [naphtha] market is oversupplied," said a trader.

Compounding the situation, the ethylene margin in northeast Asia based on naphtha feed dropped by $5/tonne in the week ended 14 June to $116/tonne, according to an ICIS Weekly Margin report.

Asian ethylene prices were assessed unchanged at $1,200-1,220/tonne CFR NE (northeast) Asia amid subdued trade on 17 June, ICIS data showed. But prices were lower compared with $1,200-1,230/tonne CFR NE Asia four weeks earlier.

Notwithstanding stable-to-firmer cracker run rates, the naphtha market buckled under pressure as Asia is being flooded by deep-sea inflows from the northwest Europe, the Mediterranean, Russia and the US, traders said.

Some of the supposedly June-arrival arbitrage material has already been pushed over to July, and this highlighted the glut in the market, they added.

In reflection of the bearish market mired in long supply, the transactions seen in the slew of tenders and spot deals saw prices dipping even into negative territory, such as in the case of the purchases made by Taiwan's Formosa Petrochemical Corp (FPCC).

FPCC bought by tender 80,000-90,000 tonnes of spot naphtha supply for delivery to Mailiao in July. The deals for the cargoes were done at discount levels ranging from 50 cents/tonne to $1.50/tonne to Japan quotes CFR.

FPCC last bought by tender 30,000-60,000 tonnes of spot naphtha supply at a premium of below $10/tonne for delivery to Mailiao in the first half of June,

India's Mangalore Refinery and Petrochemicals Ltd (MRPL) has sold by tender a 35,000 tonne naphtha cargo for loading from the New Mangalore port on 13-15 July, at a premium of $26-27/tonne (€19.50-20.15/tonne) to Middle East quotes FOB (free on board).

In its previous tender, MRPL sold a similar-sized cargo at a higher premium of $34.50/tonne to Middle East quotes FOB for loading in early July.

India's Reliance Industries Ltd (RIL) has sold 55,000 tonnes of spot naphtha supply to trading firm Vitol for 5-10 July loading from Sikka, at a lower premium of $23.00-24.00/tonne (€17.25-18.00/tonne) to Middle East quotes FOB, compared to its recent sale.

RIL previously sold 35,000 tonnes of spot naphtha supply to trading firm Mercuria at a premium of $29.50/tonne to Middle East quotes FOB for loading on 24-28 June.

"The current market is oversupplied while demand is stable, so the [prices] are lower," said one trader.

Meanwhile, South Korea's Yeochun NCC (YNCC) has raised the operating rates at its three naphtha crackers in Yeosu to 97% capacity at the end of the week ended 14 June.

The crackers, which have a combined ethylene nameplate capacity of 1.9m tonnes/year, were being operated at 93% capacity previously.

The rates were being pulled up because of the restart of downstream units related to Daelim Industrial Co following an explosion at its premises.

Japan's Mitsubishi Chemical is operating its naphtha crackers in the country at 85% capacity in June, which are similar to the levels in May.

By: Felicia Loo

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