20 December 2013 08:17 [Source: ICIS news]
By Felicia Loo
SINGAPORE (ICIS)--Asia’s naphtha prices are getting a boost from delays in inflows of deep-sea supply, as well as from the firming downstream markets in China ahead of the Lunar New Year in January, traders said on Friday.
The regional naphtha market is getting balanced in terms of demand and supply. Healthy demand is dominating the scene now, while surplus cargo availability was a thing of the past as the market faces delays in receiving US arbitrage arrivals, they said.
High liquefied petroleum gas (LPG) prices have also prompted end-users to rely on naphtha as feedstock for production, traders said.
“The market is temporarily not facing any excess [arbitrage] supply. Demand, on the other hand, is healthy,” said one trader.
At midday, open-spec first-half February naphtha prices rose by $3.50-4.50/tonne (€2.48-3.29/tonne) from Thursday to $991-994/tonne CFR Japan – the highest levels since early December, ICIS data showed.
On 19 December, the spread between the first-half February and the first-half March naphtha contracts widened to a backwardation of $17.75/tonne from a backwardation of $15.00/tonne earlier in the week, it indicated.
The naphtha crack spread against February Brent crude futures strengthened to $168.00/tonne on 19 December, the strongest levels since 28 February this year, the data showed.
Deliveries to Asia of 150,000-200,000 tonnes of deep-sea naphtha from the US will be delayed owing to rough wintry conditions that caused shipments to be stuck earlier in the US gulf coast.
The vessels were facing rough weather conditions in the Panama Canal, the traders said. Ships from the Atlantic Ocean cross the Panama Canal to the Pacific Ocean.
The vessels were supposed to arrive in Asia in the second half of December, but the arrivals will be due in January instead, the traders said.
Asia may receive up to 2m tonnes of arbitrage naphtha supply from the western markets during January, including volumes spilled over from December. These were mostly heavier grade naphtha, hailing from northwest Europe, the Mediterranean, Russia and the US.
Meanwhile, naphtha exports from India remained stable, with the refiners there estimating to be shipping out around 700,000 tonnes of naphtha in January, close to the volumes shipped out for the month of December, traders said.
For December, the refiners in India were estimated to be exporting a total of 725,000 tonnes, they said.
Reflecting healthy demand, Japan’s imports of naphtha for ethylene production increased by 18% month on month to 1.38m tonnes in November, according to official data from the Ministry of Economy, Trade and Industry (METI).
Downstream wise, demand was perceived to be healthy.
For low density polyethylene (LDPE), prices in China hit their highest in nearly three years in early December, because of reduced local production and imports, industry sources said on 13 December.
China, the world’s second-biggest economy after the US, is estimated to have imported a combined volume of 1.32m tonnes of polyethylene (PE) and polypropylene (PP) in November, up by 26.6% from the previous month, local traders said.
Some 841,000 tonnes of PE and 480,000 tonnes of PP were brought into the country in November, they said. Comparing the figures with the official data for October imports, PE imports in November increased by 25.7%, while PP imports were up by 28.4%, the traders said.
However, some traders said the current bullish naphtha market would be temporary as demand would slide following the end of the Lunar New Year and the active cracker maintenance from March next year would cast downward pressure on prices.
Besides, the Chinese economy, the world’s second biggest after the US, was not performing spectacularly well, as seen in the data recently.
HSBC’s flash manufacturing purchasing managers’ index (PMI) for China was at a three-month low of 50.5 in December, down from its final reading of 50.8 in November.
A PMI reading above 50 indicates an expansion, while a reading below 50 denotes a contraction in manufacturing activities. HSBC expects China's GDP growth to be around 7.8% in the fourth quarter.
($1 = €0.73)
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