Asian naphtha margin near 15 week low

11-Feb-14

Naphtha margin in Asia erased its marginal gains from the previous session and fell to 3-1/2 month low of US$123.18/ton, as approaching cracker maintenance in Japan and the availability of liquefied petroleum gas (LPG) weighed on sentiment, as per Reuters. This allowed LG Chem to pick up around 25,000 tons of naphtha for H1-March delivery at a premium of about US$7.50/ton to Japan quotes on a cost-and-freight (C&F) basis, the lowest price seen in South Korea since October 21. LPG can replace 5 to 15% of naphtha in some of Asia's petrochemical units, but its prices have been kept high recently due to heating requirements in the Europe and the United States. "The Asian market is going down because of LPG. The volumes of the western cargoes coming in are now seen to be too high," said a Singapore-based trader. There are at least 1.4 million tonnes of cargoes arriving in Asia from Europe and the Mediterranean. Traders said that as naphtha is intrinsically linked to LPG, gasoline and to some extent condensates, the naphtha market may not stay weak should gasoline demand pick up ahead of the summer driving season.