SINGAPORE (ICIS)--Asia naphtha’s market structure shrank in backwardation as regional demand is easing following disruptions at a downstream aromatics facility in Taiwan following an explosion, resulting in a lack of bullish expectations for the coming days.
- FPCC likely to reduce naphtha purchase
- Naphtha spot prices up slightly on higher crude
- YNCC picks up H2 May supplies
Naphtha’s forward intermonth time-spread between the second half of May and the second half of June stood at $3.75/tonne in backwardation at early hours session on Tuesday, with prompt-month prices firmer than forward months.End use applications of naphtha include fuel for lighters
But the same time spread was at a wider backwardation of $8.00/tonne a month earlier, and in double-digit territory in end-January, according to ICIS data.
Reflecting the softer market sentiment, Naphtha’s crack spread to June ICE Brent crude oil futures, closed at $41.98/tonne on 8 April, down from $50.60/tonne in the preceding week, ICIS data showed.
The crack spread, a measure of naphtha refining margins, stood at a high of $64.93/tonne on 26 March.
Taiwan’s Formosa Petrochemical (FPCC), a key importer of naphtha plans to skip its spot tender for second-half May requirements, culminating from an explosion affecting a related aromatics unit.
FPCC is considering cutting operating rates at its No 3 cracker with a 1.2m tonnes/year ethylene capacity, which would invariably lessen its feedstock naphtha demand.
FPCC’s plans to skip its second-half May purchase was perceived to be offsetting some of the Asia demand for second-half May spot supplies.
The firm last bought around 100,000 tonnes of open-specification naphtha for first-half May delivery to Mailiao.
Malaysia based Lotte Chemical Titan bought two 25,000 tonnes size parcels of naphtha for delivery in the second-half of May at a low single-digit premium to spot CFR (cost and freight) Japan quotes.
South Korea’s NCC (YNCC) was understood to have also picked up second-half May supplies.
While market fundamentals showed signs of softening, naphtha prices were driven by a rally in crude oil prices, which the petrochemical is closely related to.
Open-spec naphtha prices for second-half May delivery stood at $574.75/tonne CFR (cost and freight) Japan basis at early hours session on 9 April, up by $2.00/tonne from the previous day’s close, according to ICIS data.
Brent crude oil futures for June rose to $71.10/bbl to high fresh five-month highs amid concerns of global supplies tightening.
Focus article by Melanie Wee