Asia sees naphtha demand strengthening amid lower stocks

12-Jul-12

Asia's naphtha price reversed losses to reach a three-session high of US$825/ton on Wednesday while margins surged nearly 11% to hit a two-month high of US$84.8/ton premium as demand strengthened amid tighter supplies, as per Reuters. Improved petrochemical margins has mainly attributed to the strength in the market as they helped spur demand for naphtha feedstock to run petrochemical units. South Korea's YNCC bought a total of 100,000 tons of naphtha for August delivery at premiums of about US$8.50/ton to Japan quotes on a cost-and-freight (C&F) basis. This was higher than what rival LG Chem paid the previous day at US$7.50/ton premium. But traders tread with caution as the persistent European crisis will continue to fuel volatility in the market. "The petrochemical market is improving as a whole," said one of the traders based in Singapore. "This means that Europe and the U.S. will also increase their operating rates and vie for naphtha feedstock, But given the uncertainty of the economy, no one knows for sure what the future holds." For now, sellers were enjoying stronger fundamentals. "The spot market will get firmer in the short term, but over he longer term, how the market performs will be largely dependent on the Western exports to Asia," said a North Asian trader.