19 July 2013 06:48 [Source: ICIS news]
By Felicia Loo
SINGAPORE (ICIS)--Asia’s naphtha prices are expected to move sideways amid a balanced market, as strong demand for gasoline blending is met by rising naphtha supply from the Middle East and amid ample cargo availabilities from the West, traders said on Friday.
At midday, open-spec naphtha prices rose by $8-9/tonne from Thursday to $915-918/tonne (€695-698/tonne) CFR (cost & freight) Japan basis, ICIS data showed.
“The [naphtha] fundamentals are not bad. The market is generally balanced, and it’s not tight. There is a greater incentive to use naphtha for [gasoline] blending as the mogas/naphtha spread has widened,” said one trader.
Naphtha is used as a petrochemical feedstock and as a blending component in making motor fuel.
While there was a couple of regional cracker outages that took place in the middle of the week, traders said the shutdowns would be brief and the impact on the market would be marginal.
Formosa Petrochemical Corp (FPCC) shut its 700,000 tonne/year No 1 naphtha cracker in Mailiao, Taiwan, on 17 July due to a power outage, with no firm restart date set for the facility, while Shanghai SECCO Petrochemical, meanwhile, had a technical issue at its 1.2m tonne/year naphtha cracker in China on the same day.
Overall, naphtha demand was regarded as firm, as the market remained well-supported by gasoline blending needs, traders said.
Besides the spike in gasoline demand in Indonesia because of Ramadan – the month-long Muslim fasting month that started in mid-July – the gasoline market was facing a supply squeeze in Asia, traders said. Indonesia is Asia’s top gasoline importer.
A spate of earlier refinery shutdowns in Asia had led to a drawdown of gasoline inventories in the region, and this was compounded by a strong US market that drew European gasoline, traders said.
There were a slew of residual fluid catalytic cracker (RFCC) shutdowns in northeast Asia, predominantly in Taiwan and in South Korea, they added.
Meanwhile, Indian gasoline supplies were headed for the Middle East, further draining cargo availabilities in Asia.
On naphtha, supply is rising from the Middle East and cargo availabilities from the western markets were ample, traders said.
Asia is expected to receive 1.1m tonnes of deep-sea naphtha supply from the western markets in August, up from 900,000-1.0 mln tonnes in July.
The arbitrage shipments usually hail from northwest Europe, the Mediterranean, Russia and the US.
“The naphtha market is getting stable,” one trader said.
The rise in such shipments are expected to be absorbed in the market given firm naphtha purchases made by regional crackers of late, traders said.
However, concerns over a weakening Chinese economy weighed on the market.
China’s economic expansion decelerated further in the second quarter, with growth posted at a four-year low of 7.5%, down from a 7.7% clip in the first three months of the year.
In the downstream sector, China is estimated to have imported 1.07m tonnes of combined polyethylene (PE) and polypropylene (PP) in June, down by 1.5% from the previous month, according to local traders. Some 702,000 tonnes of PE and 370,000 tonnes of PP were brought into the country last month, they said.
($1 = €0.76)
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