Naphtha and petrochemical feedstock markets open on a high note in 2010

06-Jan-10

Naphtha prices in Asia have opened on a high note in 2010. Strengthened by robust petrochemical demand from China, prices are expected to climb higher this week. Additionally, Asia is also faced with low arbitrage supply as frigid temperatures in Europe hamper shipments to the East. As per ICIS, open-spec naphtha for H2-February delivery was assessed at US$752.50-$755.50/ton CFR Japan, and H1-March contract was quoted at US$$744.50-747.50/ton CFR Japan, while H2-March contract was pegged about five dollars lower. This indicates a rise of US$12-14/ton from the previous trading day, triggered by a rise in crude futures prices in January 2010. Premiums for full-range naphtha were quoted at US$20-$25/ton to published CFR Japan quotes, while open-spec naphtha premiums were at $17-$18/ton. The crack spread between naphtha and Brent crude futures was assessed healthy at US$151/ ton as compared to the 20-month high of US$175.95/ton on 22 December. An offer for a 3,000 ton ethylene spot cargo was pegged at US$1250/ton FOB SE Asia for January lifting. This represents a generous spread to naphtha prices, indicating a wide profit margin for regional steam cracker operators, providing incentive to increase production rates. Tightness in the US and European benzene markets have helped fuel the rise in Asian prices, along with strong crude futures and bullish sentiment. The market is faced with lack of March spot parcels at a time when buyers are more enthusiastic to book fresh cargoes in anticipation of a further hike in benzene prices. Demand from the derivatives market is picking up particularly in SM [styrene monomer] sector. Spot benzene prices for March shipments rose by US$40 per tom to US$1080-1090/ton FOB (free on board) Korea.