Asia naphtha gains 6% month on month; demand to sustain

Source: ICIS News


SINGAPORE (ICIS)--Asia’s naphtha prices were underpinned by consistent end-user demand, which is expected to prevail in the near term.

Tokyo port (Photo by Franck Robichon/EPA-EFE/REX/Shutterstock)

In early trade on Wednesday, open-spec naphtha prices for second-half May delivery stood at $573.75/tonne CFR (cost and freight) Japan, up by $6.25/tonne from the previous day’s close, according to ICIS data.

Spot prices were up by some 6% in comparison with month-earlier levels, ICIS data showed.

Naphtha prices tracked gains in global crude oil futures, to which the petrochemical feedstock is closely related.

At midday, ICE Brent June crude oil futures were up 33 cents at $69.70/bbl, shrugging off inventory data that showed a rise in US crude oil stocks.

In northeast Asia, a steady stream of naphtha end-user demand for petrochemical production is helping absorb regional supply.

South Korea’s Hanwha Total Petrochemical bought at least two 25,000-tonne cargoes of heavy full-range naphtha for first-half May delivery to Daesan, at a premium of $7.00-8.00/tonne to spot CFR Japan quotes.

Previously, the firm paid a premium near $6.00/tonne for spot supplies to be delivered in the second-half of April.

Taiwan’s Formosa Petrochemical (FPCC) has secured around 100,000 tonnes of open-specification naphtha cargoes for first-half May delivery to Mailiao, at a premium near $4.00/tonne to its pricing formula.

FPCC earlier paid a premium just under $2.00/tonne to its pricing formula for second-half April delivery supplies.

South Korea’s LG Chem was understood to have also fulfilled its first-half May, as well as second-half May spot requirements.

The steady South Korean demand comes even as scheduled cracker turnarounds are being carried out.

South Korea’s Hanwha Total Petrochemical is conducting scheduled maintenance at its Daesan cracker from late-March for about 45 days, which will eventually raise its ethylene capacity.

Meanwhile, western arbitrage arrivals in Asia this month are expected to be lower than March cargo volumes, estimated at an average of around 2m tonnes. This may well help to counter some of the bearishness stemming from heavy deep-sea cargo flows.

Reflecting improved market sentiment, Asia's naphtha market was at a backwardation of $8.00/tonne since the start of April, in which prompt-month prices are firmer than forward months. The backwardated spread was narrower, at $6.00/tonne a month earlier.

Focus article by Melanie Wee