06 September 2013 03:41 [Source: ICIS news]
By Felicia Loo
SINGAPORE (ICIS)--Asia’s prompt naphtha prices is likely to draw support from tightening deep-sea inflows from the West in October and upbeat economic data that signalled firm petrochemical demand, traders said on Friday.
The arbitrage supplies from northwest Europe and the Mediterranean will be reduced in October, when active refinery maintenance will take place, they added.
Underpinning the market was a set of positive economic data from China, South Korea and Japan, although it remains to be seen whether the positive data could be sustained in the following months.
The price differentials fetched in the spot purchases and tenders reflected an improving naphtha market overall, traders said.
On Friday, open-spec second-half October prices dropped by $1-2/tonne at $965-968/tonne (€733-736/tonne) CFR (cost & freight) Japan in tandem with global crude futures.
The naphtha backwardation between the second-half October and second-half November contracts widened to $3.50/tonne on Thursday from a backwardation of $2.50/tonne earlier in the week, ICIS data showed.
“The supply seems to tighten with the reduced arbitrage [volumes]. And the market is improving,” said a trader, referring to second-half October supply.
The Bank of Japan (BOJ) said on 5 September that the country’s economy is recovering moderately, partly on the back of a pick-up in exports, and that it will maintain its plan to increase the monetary base by as much as yen (Y) 70,000bn ($701bn) a year.
An increase in the monetary base has an inflationary effect. The country has been battling to overcome deflationary pressures that has lasted for nearly 15 years. Japan is the world’s third largest economy and is a major producer of petrochemicals.
South Korea’s economy rose by 2.3% year on year in the second quarter as its production of chemicals and overall exports grew, official data showed on 5 September.
Meanwhile, the country’s GDP rose a seasonally adjusted 1.1% in the second quarter from the previous three months, the Bank of Korea (BOK) said in a statement.
On the production side, the South Korean manufacturing sector grew by 2.1 % year on year, owing to growth in sub-sectors such as electrical & electronic devices and chemical products, according to the central bank.
Meanwhile, HSBC’s final reading of its purchasing managers’ index (PMI) for China rose to 50.1 in August from 47.7 in July, boosted by new orders and output, the investment bank said on 2 September.
The final August reading matched HSBC’s preliminary PMI figure published on 22 August.
PMI is a barometer of an economy's manufacturing activities, with a reading above 50 indicating an expansion, and a lower number denoting a contraction.
On the markets front, South Korea’s Yeochun NCC (YNCC) bought 75,000 tonnes of naphtha for delivery to Yeosu in the second half of October. The deal for the three cargoes was done at a premium of 50 cents/tonne to Japan quotes CFR pricing, traders said.
The YNCC purchase was an improvement over a recent spot transaction made by LG Chem.
South Korea’s LG Chem bought 50,000 tonnes of naphtha for delivery in the first half of October. The deal for the Yeosu-bound cargo was done at a discount of $1/tonne to Japan quotes CFR, while the Daesan-bound cargo fetched a discount of 50 cents to Japan quotes CFR.
On 5 September, LG Chem bought a 25,000 tonne naphtha cargo for delivery in the second half of October, at a premium of $1/tonne to Japan quotes CFR.
India’s Mangalore Refinery and Petrochemicals Ltd (MRPL) sold by tender a 35,000-tonne naphtha cargo for loading from New Mangalore, to oil major Shell.
The deal for the cargo was done at a premium of $21/tonne to Middle East quotes FOB pricing and the loading dates are 22-24 September.
Subsequently in the week, MRPL sold by tender a 35,000 tonne naphtha cargo for loading from New Mangalore on 1-3 October, at a firmer premium. Japanese trading firm Idemitsu bought the cargo at a premium of $26/tonne to Middle East quotes FOB.
A similar improving price trend was also reflected in the spot tender sale state-owned Indian refiner Oil and Natural Gas Corp (ONGC).
ONGC sold a 35,000-tonne naphtha cargo for loading from Mumbai on 23-24 September, to Shell, at a premium of $21/tonne to Middle East pricing FOB.
In the latter part of the week, ONGC sold by a similar-sized naphtha cargo for loading from Hazira on 1-2 October, at a premium of $23/tonne to Middle East quotes FOB.
The buyer was Chinese trading firm Unipec.
($1 = €0.76)
Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
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