Naphtha buyers in Asia buy H1-May cargoes at higher prices

31-Mar-16

Japan's Idemitsu Kosan and Taiwan's Formosa Petrochemical Corp bought naphtha for H1-May delivery at sharply higher prices, with the former paying a premium versus a discount for a H1-April cargo, as per traders in Reuters. Idemitsu bought the medium-range size vessel cargo of about 25,000 tons at a premium of between US$4 and US$5/ton to Japan quotes on a cost-and-freight (C&F) basis. This was a sharp jump compared to a discount of US$2 it had paid on March 1 for a H1-April cargo as the market has now strengthened on the back of reduced western cargoes arriving in Asia next month. "The main reason behind the stronger market is the low western cargoes coming to Asia. The strength could persist through for cargoes delivering in H2-May," said an industry source based in Singapore. An average of 1.4 million tonnes of naphtha are estimated to arrive in Asia next month compared to the monthly average of 1.8 mln tons for the first three months of this year, traders said. Firm demand for naphtha as crackers are mostly running at high rates to cash in on petrochemical margins had also helped remove most of the excess supplies which had persisted for months. Formosa has locked in between 100,000 and 150,000 tons volumes of naphtha for H1-May arrival at Mailiao. Prices were given in a wide range, but four traders estimated closer level would be between flat and a discount US$1/ton to Japan quotes on a C&F basis. The petrochemical firm had paid a discount of US$9-9.50 on March 11 for cargoes delivering to Mailiao in H2-April. Both deals could not be directly confirmed as buyers do not comment on their trades.