Asia’s naphtha prices will be buoyed in the weeks ahead by Chinese end-users' stockpiling of petrochemicals ahead of the Lunar New Year holiday, stripping off the limited feedstock supply in the region, as per ICIS.
At noon, the open-spec first-half March naphtha contract rose by US$1/ton at the upper end of the range to US$989.50-992.50/ton CFR (cost & freight) Japan. Asian naphtha prices are currently at their highest levels since 17 September 2012, ICIS data showed. On 23 January, the naphtha crack spread against March Brent crude futures strengthened to US$147.8/ton – the highest level since 26 December 2012 – from US$111.06/ton in the previous day. The spread between the H1-March and the H1-April contracts widened US$1/ton from 22 January to US$18/ton in backwardation on Wednesday.
“Supply is tighter because of low Indian exports,” said a trader in Singapore.
Reflecting strong demand and tighter supply, South Korea’s LG Chem bought 75,000 tons of spot naphtha for delivery in the H1-March at higher premiums, traders said.
LG Chem bought two 25,000 ton cargoes for delivery to Daesan at a premium of US$18-19/ton to Japan quotes CFR over a 30-day pricing period. One 25,000-tonne cargo for delivery to Yeosu was purchased at a premium of US$11.50/ton to Japan quotes CFR over a 45-day pricing period.
The South Korean company previously bought 50,000 tons of spot naphtha for delivery from the second half of February to early March, at a premium of US$9/ton to Japan quotes CFR.
Meanwhile, LG Chem is operating its two crackers – a 940,000 tpa unit in Daesan and a 1 mln tpa unit in Yeosu – at full capacity this month and will continue to do so in February.
Spot naphtha premiums strengthened in response to the sharply lower Indian exports, as well as the postponement of deep-sea naphtha deliveries from Europe, traders said.
India will continue to ship out low volumes of naphtha in February, with the quantity estimated to be 500,000 tons – lower than the 600,000 tons exported in January and far weaker than the country’s usual monthly average exports of 800,000-900,000 tons, traders said.
Its January naphtha exports were earlier estimated to be 800,000 tons, but the actual shipment volume turned out lower because of refinery maintenance works and a fire incident at a Hazira-based gasoline storage tank.
Meanwhile, Asia is facing a delay in deep-sea naphtha shipments from Europe and the US because of poor weather conditions. Naphtha deliveries were postponed from the second half of February to the first half of March. At least 500,000 tons of arbitrage naphtha from the western markets were initially expected to arrive in Asia from the H2-February. Low shipments from India and delays in the entry of arbitrage cargoes into Asia led to high premiums being fetched on spot naphtha sales. India’s Reliance Industries Ltd (RIL) sold a total of 90,000 tons of spot naphtha for loading from Sikka next month.
Chinese end-users are also stocking up on petrochemical products ahead of the week-long Lunar New Year holiday next month, shoring up demand for naphtha, traders said.
The Chinese market will be closed on 9-15 February.