Asia naphtha tumbles to three-month lows on ample supply

13 February 2014 10:52 Source:ICIS News

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By Felicia Loo

SINGAPORE (ICIS)--Asia’s open-spec naphtha prices tumbled to their lowest levels in more than three months on Thursday, as the markets were undermined by ample supply and receding demand, traders said.

The second-half March naphtha contract fell by $8.50/tonne from 12 February to $924.00-926.00/tonne CFR (cost & freight) Japan, at the close of trade on Thursday.

The prices were the lowest recorded since 8 November 2013, when the front-month contract closed at $919.50-921.50/tonne CFR Japan.

In the cash market, a first-half April cargo changed hands from Japanese trading firm Marubeni to trading firm Glencore at $921.50/tonne CFR Japan, the traders said.

The time spread between the second-half March/second-half April contracts narrowed 50 cents/tonne to $6.00/tonne in backwardation, keeping to a downward trend since early February, ICIS data showed.

The backwardation is now at its weakest since 18 October 2013, when the prompt time spread stood at $5.25/tonne in backwardation, it indicated.

Meanwhile, the crack spread versus Brent crude futures narrowed to $113.95/tonne on Thursday from $116.53/tonne on 12 February.

The crack spread hit the lowest since 24 October 2013, when it was assessed at $109.45/tonne, based on ICIS data.

Naphtha prices were heading south given abundance of available cargoes, taking into account the consistently huge deep-sea inflows from the West, the traders said.

Demand wise, the requirements were tightening because of heavy cracker turnarounds scheduled from February to June this year, they said.

Spot premiums on naphtha deals have also declined in view of the weakening market conditions.

South Korea’s Lotte Chemical bought a spot 25,000-tonne naphtha cargo for delivery to Yeosu in the second half of March, at CFR Japan quotes plus $5.50/tonne, down from the $10.00/tonne premium fetched in a previous spot purchase.

Early in the week, South Korea’s LG Chem purchased a 25,000-tonne naphtha cargo for delivery in the first half of March, at a premium of $7.50/tonne to CFR Japan quotes.

Downstream, ethylene prices continued to slide from recent highs achieved since 2008, with prices on CFR NE (northeast) Asia basis dipping $10/tonne at the high end to $1,460-1,480/tonne on 12 February, ICIS data showed.

Just four weeks ago, ethylene prices were at $1,520-1,550/tonne CFR NE Asia.

By Felicia Loo