Lotte Chem buys naphtha for H1-April at prices higher than H2-March

16-Feb-16

South Korea's Lotte Chemical bought H1-April naphtha cargoes at flat to Japan quotes on a cost-and-freight (C&F) basis vs a discount of US$5-5.50/ton on Feb. 3 for H2-March cargoes, as per traders in Reuters. The petrochemical maker likely bought two cargoes totalling about 50,000 tons, said the traders, but this could not be independently confirmed as the company does not typically comment on its deals. The sharp jump in prices could be due to an easing supply glut and sellers having less pressure to sell at discounts given that this was the first purchase tender in South Korea for H1-April cargoes, said the traders, who did not participate in the tender sale. "This is the first tender from South Korea for April cargoes, so sellers do not feel the urgency to sell at low prices. But it is still a good start for sellers as prices did not kick off at discounts," said a North Asian trader. Naphtha cargoes arriving in Asia in March from Europe, the Mediterranean and the U.S. so far are expected to be less than 1.3 mln tons compared to the record 2.2 mln tons for January arrival and at least 1.7 mln tons for February arrival. However, sellers still have time to fix cargoes for second-half March arrival in Asia. Premiums in South Korea flipped into discounts on Jan. 11 for the first time since early November and had remained at low levels since. Other than Lotte Chemical, Hanwha Total was also in the market but it bought a cargo for H2-March delivery at a discount of US$2/ton to Japan quotes on a C&F basis, said the three traders. "April is looking tighter but there's still some unsold cargoes for March, which explained the discount," said a Singapore-based trader.