Asia naphtha seen rangebound as supply exceeds demand

SINGAPORE (ICIS)–Asia’s naphtha prices are expected to be rangebound as regional supply continues to outstrip demand, traders said on Tuesday.

At midday, first-half October open-spec naphtha prices rose by $4.75/tonne to $396.50-398.50/tonne CFR (cost and freight) Japan.

The naphtha crack spread had weakened by a fifth from 26 August to $24.50/tonne at the close of trade on 29 August, while the time spread between the first-half October and the first-half November contracts were unchanged at a contango of $7.00/tonne, ICIS data showed.

“Demand is still weak,” said a trader. “Domestic [naphtha] inventories in this region are high so the buying appetite is weak.”

Naphtha supply within the region was plentiful amid stable refinery runs, with refiners using more light crude supply and condensate splitters running at firm rates, the traders said.

Physical cargoes continued to trade at deep discounts to market quotes, as the Asian naphtha market remained under pressure amid ample supply.

Last week, a couple of South Korean cracker operators bought first-half October open-spec material at discounts of $13.00-13.50/tonne to CFR Japan quotes.

Taiwan’s Formosa Petrochemical Corp (FPCC) has bought by tender 100,000 tonnes of naphtha supply for delivery to Mailiao in the first half of October, at a discount of $15.00-16.00/tonne to CFR Japan quotes.

In its previous spot tender, FPCC bought by tender 60,000-90,000 tonnes of spot naphtha for delivery to Mailiao in the second half of September at a discount of $16.00/tonne to CFR Japan quotes.

Meanwhile, China’s petrochemical imports were mostly lower in July, with the country’s intake of naphtha down by 35% year on year to 436,818 tonnes, official customs data showed.

China, the world’s second-biggest economy, is a major importer of petrochemicals in Asia.

In the polyester chain, its July imports of paraxylene (PX) increased by 8% to 1.08m tonnes, while shipments of purified terephthalic acid (PTA) slumped by 39% to 34,548 tonnes, according to the data.

The country’s imports of monoethylene glycol (MEG) fell by 17% year on year to 649,897 tonnes.

On the olefins front, China’s imports of ethylene fell by 6% year on year to 124,039 tonnes while shipments of propylene were up by 30% at 256,372 tonnes.

While northeast Asian ethylene prices rose for a third week aided by continued demand for September-delivery cargoes amid limited product availability, restocking activity in the broader market is slowing down.

On 26 August, ethylene prices increased by $20-30/tonne week on week to $1,180-1,200/tonne CFR NE Asia, according to ICIS data.

The brisk run-up in ethylene prices to a 19-week high has led more importers to head to the sidelines due to growing worries over whether they would be able to pass the higher feedstock costs on to their customers. Margins are currently at negative to slightly positive levels for downstream producers with stand-alone operations.

On the production front, Indonesia’s Chandra Asri has lowered the run rates of its 860,000 tonne/year naphtha cracker in Cilegon to around 80% of capacity last week, from 90-95% previously.

The reduced run rates will continue for around 40 days as the company is conducting furnace maintenance works that started last week.

Meanwhile, the Petrochemical Corporation of Singapore (PCS) will shut its 650,000 tonne/year No 2 naphtha cracker in Ayer Merbau, Jurong Island in the first half of September, according to a source close to the company.

The company is taking the unit off line for about seven days in order to resolve a technical issue, which surfaced after the cracker completed a scheduled turnaround earlier this month.

The cracker is running at around 95% of capacity, with the company aiming to stockpile products before the shutdown, the source said. PCS previously shut the facility from 14 July-18 August.

Focus article by Felicia Loo

Additional reporting by Yeow Pei Lin 

Picture: An aerial photo of Yangshan Container Port in Shanghai, east China (Source: Xinhua News Agency/REX/Shutterstock)