29 October 2013 03:15 [Source: ICIS news]
By Felicia Loo
SINGAPORE (ICIS)--Asia's naphtha prices are likely to remain buoyant in response to tightening supply and firm demand in the region, traders said on Tuesday.
On Tuesday morning, open-spec first-half December prices rose by $12.50-13.50/tonne (€9.00-9.72/tonne) from Monday to $935.25-938.25/tonne CFR (cost and freight) Japan, according to ICIS data.
The backwardation between first-half December and first-half January contracts widened to $8.50/tonne on 28 October, from a backwardation of $7.75/tonne on 25 October, the data showed.
In fact, the intermonth spread has more than doubled from a backwardation of $3.75/tonne on 16 October.
“There is supply tightness in the market,” said one trader.
Refineries in Europe and in Asia are cutting runs as a consequence of bad margins, leading to lower naphtha exports from the West to the East, traders said.
The cargo availability also tightens in Asia at a time of high cracker runs in the region, which in turn are being supported by a strong styrene monomers market, they added.
“The monomers market is doing well,” one trader said.
Downstream, the overall monomers margins are strong because of supply tightness throughout the second half of the year.
Meanwhile, spot naphtha buying has been healthy from Japan because of the high cracker runs, traders said.
Mitsui Chemicals is operating its two naphtha crackers in Japan – a 450,000 tonne/year cracker in Osaka and a 617,000 tonne/year cracker in Chiba – at 85% of capacity.
Another Japanese producer, Maruzen Petrochemical, is running its 520,000 tonne/year naphtha cracker in Chiba at more than 90% of capacity.
The South Korean crackers are being operated at full capacity, traders said.
Lower deep-sea naphtha volumes from the West will further squeeze the market, they added.
Brazil may pull in barrels from the Mediterranean instead, as the naphtha arbitrage window from the Mediterranean to Brazil is open and has led to fresh opportunities for European sellers to export volumes to the country.
On expectations of higher prices ahead, LG Chem bought naphtha supplies for delivery up to the second half of January next year.
LG Chem has bought by tender three 25,000-tonne naphtha cargoes for delivery to Daesan from December 2013 to January 2014.
The first cargo is slated for delivery in the second half of December, while the second cargo for the first half of January and the last cargo for the second half of January.
The deals for the cargoes were done at a premium of $7-8/tonne to Japan quotes CFR (cost and freight).
($1 = €0.72)
Additional reporting by Clive Ong
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