Asia draws 1.5m tonnes deep-sea naphtha for Oct; up 7% from Sept

SINGAPORE (ICIS)–Asia is set to receive some 1.5m tonnes of deep-sea naphtha supply in October, traders said on Friday.

The volumes – which hail from northwest Europe, the Mediterranean, Russia and the US – are estimated to be up from 1.4m tonnes of arbitrage material slated for delivery in September, they said.

“There is a lot of supply available,” said one trader.

The deal spot naphtha cargoes were concluded at weaker price levels this week amidst burgeoning supply and receding demand, as cracker run cuts take place, the traders said.

The first-half October/first-half November spread slumped to $1.75/tonne contango on 26 August versus parity on 25 August in reflection of the market fundamentals, according to ICIS data.

The first-half October/first-half November spread slumped to $1.75/tonne contango on 26 August versus parity on 25 August in reflection of current market fundamentals, according to ICIS data.

Earlier, Asia received around 1.98m tonnes of deep-sea naphtha supply in August up from 1.6m tonnes in July and as 1.9m tonnes in June, according to market sources.

In May, the arbitrage flows bound for the east of Suez were pegged at 1.7m tonnes, they said.

The volumes were hefty from June to August owing to cracker production issues and outages in Europe.

Currently, naphtha cracking demand remains healthy in Europe as gasoline blending has slowed down, curbing the use of naphtha as part of the blending pool and capping the arbitrage flows designated for the east, the traders said.

“Overall demand is coming off [in Europe]. West African demand is not pulling [gasoline] barrels,” said one trader.

Meanwhile, in Asia, a few cracker operators have turned to reducing run rates amid price volatility this week, raising concerns of lower demand for the petrochemical feedstock.

Taiwan’s Formosa Petrochemical Corp (FPCC) has reduced run rates at its three crackers in Mailiao to 80% of capacity.

The crackers were being operated at full capacity before the run cuts.

The company has three crackers at the site, with a combined capacity of 2.93m tonnes/year.

In Japan, Maruzen Petrochemical on 26 August cut the run-rates at its 520,000 tonne/year naphtha cracker to around 90% of capacity, from 100% earlier.

Production at the Chiba site is likely to be maintained at the current level for possibly around a week.

By Felicia Loo

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