FocusAsia naphtha heads south on ample supply, petchem uncertainties

27 September 2013 05:13  [Source: ICIS news]

By Felicia Loo

Asia naphtha heads south on ample supply, petchem uncertaintiesSINGAPORE (ICIS)--Naphtha prices in Asia look set to fall further, with intermonth spread values turning weaker because of ample cargo availability and subdued spot demand during the week, traders said on Friday.

The first-half open-spec naphtha contract stood at $916.75-919.75/tonne (€678.40-680.62/tonne) CFR (cost & freight) Japan on Friday morning, down by $14.75-15.75/tonne from 20 September, according to ICIS.

“The mood is weak,” one trader said.

Higher-than-expected influx of deep-sea western naphtha cargoes and firmer exports from India are weighing down on market sentiment, traders said.

“The [arbitrage] flows have become a norm,” said one trader.

Further weakening the market was diminishing demand from the gasoline blending sector, as the end of the driving season and the switch to winter-specifications gasoline led to lower usage of naphtha for blending purpose, traders said.

“The gasoline side is not absorbing naphtha,” the trader said.

Meanwhile, Asia is expected to receive around 800,000 to a million tonnes of deep-sea naphtha from the western markets in October, up from initial estimates of 600,000 tonnes, according to traders. The cargoes will hail from northwest Europe, the Mediterranean, Russia and the US.

Although the volumes would still be lower than the 1.0m-1.3m tonnes of arbitrage naphtha supply delivered in September owing to European refinery maintenance, the inflows were considered to be heavy, traders said.

Compounding the situation, India’s naphtha shipments for October are estimated to be 800,000 tonnes, compared with around 750,000-800,000 tonnes in September, they said.

Spot naphtha demand has been subdued during the week amid cracker maintenance works, traders said.

ExxonMobil’s Singapore-based 900,000 tonne/year cracker is being shut for a month in September/October period, according to ICIS data.

Taiwan’s Formosa Petrochemical Corp has taken its 1.03m tonne/year cracker in Mailiao off line on 16 September, with the maintenance expected to last until end-October.

Separately, Taiwan’s CPC would shut its 385,000 tonne/year cracker in Linyuan for 90 days from in early October.

South Korea’s KPIC plans to shut its 470,000 tonne/year Onsan-based cracker from 5 October to the end of October, while Japan’s Mitsubishi Chem’s 489,000 tonne/year cracker in Kashima has been shut since 26 August and will not restart until mid-October.

Consequently, the premiums awarded in spot tenders were softer in tandem with the market fundamentals.

India’s Reliance Industries Ltd (RIL) sold 55,000 tonnes of naphtha for loading from Sikka on 25-30 October, to trading firm Glencore, at a premium of $15.00-17.00/tonne to Middle East quotes FOB, traders said.

In its previous tender, Reliance sold two 55,0000-tonne naphtha cargoes for loading from Sikka during 8-17 October at a premium of $23-24/tonne to Middle East quotes FOB, to Japanese trading firm Itochu and Glencore.

The naphtha backwardation, or the spread between the first-half November/first-half December contracts, narrowed to $2.75/tonne at the close of trade on 26 September, down by half from 19 September, ICIS data showed.

In the meantime, renewed concerns over the health of the Chinese economy and the general petrochemical demand weighed on the naphtha feedstock market.

“The Chinese economy is uncertain,” one trader said.

The imminent restart of Fushun Petrochemical’s PE plants following a turnaround is expected to put pressure on China’s domestic prices. There are also concerns that buyers and sellers in China will have built up high PE stocks following the week-long National Day holiday in early October, which in turn may dampen Chinese import demand.

($1 = €0.74)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Felicia Loo

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