Asia naphtha slides on crude oil fall; demand muted

SINGAPORE (ICIS)–Asia’s naphtha prices tumbled on Monday on losses in global crude oil benchmarks, with muted demand and ample supply also weighing on the market.

Container ships at Tokyo port. (Photo by Koji Sasahara/AP/Shutterstock)

In early hours session, open-specification naphtha prices for first-half October delivery stood at $454.50/tonne CFR (cost and freight) Japan basis, falling by $15.25/tonne from the previous Asia close on 23 August.

Spot CFR Japan naphtha prices have slumped to their lowest in more than two weeks against a slippery slope backdrop, according to ICIS data, undermined by volatility in global oil prices.

At midday, ICE Brent crude oil futures for October were trading 66 cents lower at $58.68/bbl, amid concerns about a potentially acute global economic slowdown.

Worries were further exacerbated by the intensifying US-China trade war as China targets tariffs on US plastics and chemicals.

In northeast Asia, most naphtha end-users have yet to surface to buy first-half October-delivery cargoes, yielding limited physical trade.

The lack of buying coincides with cracker turnarounds in Asia Pacific, chipping at demand for the petrochemical feedstock.

Taiwan’s Formosa Petrochemical (FPCC), Asia’s major naphtha buyer, is carrying out scheduled maintenance at its No 2 cracker in Mailiao with an ethylene capacity of 1.035m tonnes/year until end-September, following its shutdown in mid-August.

FPCC had already skipped its monthly tender to buy September-delivery spot naphtha owing to the turnaround in the same month.

Reflecting the bearish sentiment, Asia naphtha’s crack spread, a measure of its refining margin – fell below $20/tonne on 21 August at $19.85/tonne – contrasting with $31/tonne levels a month earlier, ICIS data showed.

Elsewhere, Philippines’ JG Summit will carry out planned maintenance as part of expansion works at its cracker in Batangas from early-October to early-December.

Naphtha is a key petrochemical feedstock for downstream crackers in the production of olefins and aromatics.

Focus article by Melanie Wee

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