By Felicia Loo
SINGAPORE (ICIS)--Asia’s naphtha prices are likely to increase in response to strong cracking demand, which is being bolstered by healthy petrochemical margins, traders said on Friday.
Prices are rising in spite of the voluminous deep-sea supply flooding the region, they said.
Open-spec naphtha prices for second-half February were recorded at $975.50-977.50/tonne CFR (cost and freight) Japan at the close of trade on Friday, up from $968.25-971.25/tonne CFR Japan at midday, ICIS data showed.
“Demand is strong because of good margins. The crackers are running high,” said one trader.
The uptrend in ethylene prices – driven by restocking activity in China in the weeks leading the Lunar New Year in late January, as well as tight supply – are encouraging maximum runs at regional crackers, traders said.
Ethylene spot prices in northeast Asia rose by $60-80/tonne to $1,500-1,540/tonne CFR NE Asia in the week ended 3 January, according to ICIS.
Meanwhile, ethylene spot prices in southeast Asia increased by $15-40/tonne to $1,415-1,490/tonne CFR SE Asia over the same period, it stated.
Ethylene margin in northeast Asia, based on naphtha feedstock, rose to $283/tonne in the week ended 3 January, from $156/tonne in the week ended 27 December last year, according to the ICIS Weekly Margin report.
In a sign of strong demand, Japanese end-users bought open-spec naphtha supply at firmer premium levels.
Maruzen Petrochemical has bought a spot naphtha cargo of 25,000 tonnes for prompt delivery to Chiba in the first half of February. The deal for the open-spec cargo was done at a premium of $18-19/tonne to Japan quotes CFR.
Similarly, Mitsui Chemicals has purchased a 25,000-tonne naphtha cargo for delivery to Chiba in the first half of February, at a premium of $18-19/tonne to Japan quotes CFR.
A spate of Indian tenders awarded in the week was done at firm premiums, reflecting the strong market fundamentals.
India’s state-owned refiner Oil and Natural Gas Corp (ONGC) has sold by tender a 35,000-tonne naphtha cargo to PetroDiamond. The deal for the cargo, which will be loaded from Mumbai on 6-7 February, was done at a premium of $37/tonne to FOB Middle East quotes.
Indian Oil Corp (IOC), meanwhile, has sold by tender a 35,000 tonne naphtha cargo for loading from Dahej on 23-25 January, to Japanese trading firm Marubeni, at a premium of $32/tonne to IOC pricing formula FOB.
In its previous tender, IOC sold a naphtha cargo of 35,000-40,000 tonnes for loading from Dahej, to Japanese trading firm Itochu, at a premium of about $30/tonne to IOC pricing formula FOB. The loading took place during 24-26 December.
Hindustan Petroleum Corp Ltd (HPCL) has sold by tender a naphtha cargo for loading from Mumbai on 28-30 January. The deal for the cargo was struck at FOB Middle East quotes plus $34/tonne.
In the HPCL tender won by Chinese trading firm Unipec, HPCL had offered either a 15,000-20,000 tonne cargo or a 20,000-25,000 tonne parcel. The actual volumes awarded were not immediately available.
The overall strong naphtha demand would overshadow the hefty arbitrage inflows from the West, some traders said.
Asia is expected to receive 1.8m-2.1m tonnes of deep-sea naphtha supply from the western regions between January and the first half of February, according to traders.
Europe’s poor gasoline market, which resulted in very limited naphtha use in gasoline blending, prompted the increase in naphtha shipments to the east of Suez, traders said.
However, wintry weather in the West was causing some delays in shipments.
On the other hand, India’s naphtha exports were below the normal monthly average levels at 560,000 tonnes in January, traders said.
Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections