Asia’s Naphtha Price Likely to Drift Sideways on Expected Onslaught of Deep Sea Cargoes

Asia’s naphtha price likely to drift sideways on expected onslaught of deep sea cargoes

05-Mar-13

Asia will receive more than a mln tonnes of deep-sea naphtha supply from the western markets in April, similar to the 1.3 mln tons of arbitrage naphtha inflows booked for arrivals in March. The deep-sea inflows for both months will hail from northwest Europe, the Mediterranean, Russia, as well as the US. Asia’s naphtha prices are likely to drift sideways as the armada of deep-sea material arriving shortly will just help plug the region’s expected supply shortfall, as per traders in ICIS. Higher-than-expected spring refinery maintenance in Asia will cause supply to tighten. The region remains structurally short on the petrochemical feedstock but there are growing signs that downstream demand may ease given a slowing Chinese economy. By midday, Asia’s open-spec naphtha prices for H2-April contract stood at US$971-974/ton (€737.96-740.24/ton) CFR (cost and freight) Japan, ICIS data showed. Prices plunged from the week’s high of US$1018-1020/ton CFR Japan, undermined largely by weakening crude futures. "Gasoline futures in the US and Europe corrected yesterday," said one trader, adding that the price losses pressured down Asian naphtha markets. The fall in naphtha prices was regarded as a correction, some traders said. The continuous strong premiums sparked off active selling from South Korean and Indian refiners during the week. For instance, Indian state-owned refiner Oil and Natural Gas Corp (ONGC) sold by tender 35,000 tons of naphtha for loading from Hazira on 17-18 March, at a premium of around US$56.80/ton to Middle East quotes FOB. The buyer was Japanese trading firm Itochu. Refinery maintenance in Asia is more active this year, with Taiwan’s Formosa Petrochemical Corp (FPCC) scheduled to shut down a crude distillation unit (CDU) and a residue fluid catalytic cracker (RFCC) at its 540,000 bbl/day Mailiao refinery for maintenance on 19 March. Its 180,000 bbl/day CDU will be down for 50 days, while the 84,000 bbl/day RFCC will remain offline until mid-June. The premiums on naphtha trades in Asia were buoyant in response to reduced production of the petrochemical feedstock in the region, traders said.