SINGAPORE (ICIS)--Asia’s naphtha price spreads are expected to remain strong as tight supply of light naphtha prevails in a market buoyed by strong and healthy cracker margin, traders said on Friday.
At the close of trade on 27 April, the physical naphtha spread between first-half June and first-half July contracts were assessed at $7.50/tonne, compared with $6.00/tonne in the previous week, according to ICIS data.
The price spread between the second half of June and the second half of July was assessed at $5.75/tonne, up from $4.50/tonne in the previous week, the data showed.
Meanwhile, outright open-spec naphtha prices were quoted at $457.00-459.00/tonne CFR (cost and freight) Japan on Friday midday, the data indicated.
“Looking at spreads, naphtha market is strong,” said a trader.
Another trader said: “The crackers are running at high levels given good margin.”
Ethylene margins in northeast Asia rose during the week ended 14 April on higher spot prices, based on ICIS Weekly Margin report. Spot ethylene values in NE Asia rose $40/tonne week on week, enough to offset higher feedstock costs and weaker co-product credit values. Ethylene margins for naphtha-based product rose 2.2% in NE Asia.
In the regional market, the pool of light naphtha supply tightened amid splitter issues in Qatar as well as Abu Dhabi.
The splitter problems in the Middle East prompted a spike in spot naphtha premiums as evident in the latest tender sales.
India’s Mangalore Refinery and Petrochemicals Ltd (MRPL) sold by tender 35,000 tonnes of naphtha for 8-10 June loading, at a premium of $19/tonne to spot Middle East FOB (free on board) quotes.
The cargo, which will be loaded from the port of New Mangalore, was sold to Japanese trading company Marubeni.
The Indian refiner recently sold an identical volume of naphtha at a premium at around $13/tonne to spot Middle East FOB quotes for 17-19 May loading.
Taiwan’s Formosa Petrochemical Corp (FPCC) purchased around 120,000 tonnes of spot naphtha supply for delivery to Mailiao in the first half of June, at a premium of near $4.00/tonne to spot CFR Japan quotes.
Previously, FPCC bought second-half May delivered naphtha of 100,000 tonnes at a premium of around $1.00/tonne to CFR Japan quotes, for second-half May delivery.
Supporting the higher price trend further in Asia is the expected lower flow of deep-sea naphtha volumes from Europe and the US.
East-West arbitrage flows for May are estimated at around 750,000 tonnes, less than 1.1m tonnes estimated in April.
On the market trading front, Trafigura has been an active buyer on the cash session, a move which many participants said helped boost market bullishness. In addition, the cash session continued to be underpinned by a slew of trades on a daily trading basis.
Downstream, the market is buoyant as China’s imports of most petrochemicals in March recorded year-on-year growths.
In the olefins chain, imports of ethylene rose 43% year on year to 185,371 tonnes, while those of butadiene (BD) increased 44% to 41,629 tonnes. Propylene imports in March inched up 2% to 247,695 tonnes, China Customs data.
China’s imports of most polymers in March recorded double-digit growths, led by polyvinyl choride (PVC), which logged in a 49% year-on-year increase to 88,660 tonnes.
China, which is the world’s second-biggest economy, is a major importer of petrochemicals in Asia.
Focus article by Melanie Wee and Felicia Loo
Picture: A chemical tanker (Source: imageBROKER/REX/Shutterstock)