1 mln tons of naphtha imports headed for Asia in May signal fifth consecutive month of high import volumes

Europe, the Mediterranean and the United States will ship about 1 mln tons of naphtha to Asia next month, similar to volumes that have been running more than 60% higher than 2012's monthly average since January, Reuters data showed. That volume is about double Asia's structural shortage of the 500,000 tons of paraffinic naphtha it needs every month if crackers are running at full-tilt and other feedstocks such as liquefied petroleum gas (LPG) are not available. Unlike in the previous four months, sellers are beginning to feel the pressure as May inbound cargoes would be arriving amid plentiful supplies of the cheaper alternative LPG, which can replace 5 to 15% of naphtha in some Asian crackers, and when cracker runs have been reduced in Taiwan and South Korea. A naphtha surplus in the United States has made the situation for May cargoes worse, because it is betting on Asia to absorb its excess. It is not a regular exporter to Asia and sometimes takes naphtha from Europe. However, some of the 200,000 tons of U.S. naphtha, mainly of heavy grade, initially expected to arrive in Asia next month may be sent to other final destinations. Any cancellation of the U.S. cargoes is not likely to turn the weak market around as Europe will jump on the chance to replace any lost shipments to Asia. The average premium for cargoes lifting in May from India, the top spot naphtha supplier to Asia, have fallen to US$42/ton, down nearly 25% compared to March cargoes, which sold at premiums mostly at record highs due to a shortfall in supplies caused by refinery maintenance.
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