At least 225,000 tons of naphtha has been provisionally booked to arrive in Asia in H1-June from Europe and the Mediterranean, but these volumes are insufficient to cool the overheated market for now, as per traders in Reuters. The cargoes were likely booked by Total and Gunvor, traders and ship brokers said.
Asia needs an average of 350,000 tons of European naphtha a month if Asian crackers are running at mostly full capacity. But it needs more than the normal average now because of a persistent supply crunch since the start of the year due to refinery maintenance. "Even after Asia received 800,000 tones of Western naphtha in April and about 400,000 tons in May, premiums did not fall dramatically due to the shortages in Asia," said a Singapore-based trader. Free-on-board (FOB) premiums on the average were holding above US$40/ton for Indian cargoes lifting in April and May after prices hit record levels of US$59.50/ton for a March cargo sold by ONGC to Unipec. "The key reasons behind the supply tightness recently are due to Saudi Aramco and India having less to export because of refinery maintenance," said a trader based in South Asia. He estimated that India and the Middle East alone exported an average of 4 mln tons of naphtha a month last year. But India's average monthly exports from January-April this year have fallen short by about 135,000 tons (15%), from the 2011 monthly average.
Saudi Aramco is seeing a production loss of about 150,000 tons of A310 naphtha grade a month after it shut a condensate splitter at Ras Tanura for a planned 50-day maintenance. Refinery outage in Egypt also affected supplies as EGPC had to defer two 35,000 ton cargoes meant for April lifting to May and June respectively after a fire at its Suez refinery. Traders are expecting supplies to increase as Saudi Aramco restarts its condensate splitter in early May. Europe may also push more naphtha cargoes out following a fall in liquefied petroleum gas (LPG) feedstock prices. (LPG can be used to replace a portion of naphtha feedstock in steam crackers.) Demand from Asia's top naphtha buyer Formosa Petrochemical Corp should also be reduced as it will shut a 700,000 tonnes-per-year tpa cracker on June 20 for 40 days, followed by a 20-day shutdown of a larger cracker in August. Formosa's crackers maintenance will wipe out a chunk of demand for naphtha.