Naphtha crack in Asia eases marginally, spot prices in South Korea flip to premiums

04-Apr-16

Naphtha crack for front-month H1-May in Asia eased marginally on Thursday from a near 2-1/2 month high to a two-session low. Spot prices in South Korea changed over to premiums from discounts this week for the first time since late December in response to a reduction in a supply glut, as per Reuters. A reduction in the number of cargoes coming to Asia from the West, including Europe, is helping to ease the supply glut which had persisted for months and kept prices at discount levels. Traders are working on shipping cargoes for May arrival in Asia from the West, including Europe and the Mediterranean. There are about 400,000 tons of western naphtha being provisionally booked for May arrival but this is not final volume as there is still time to placed bookings. Asia had received a monthly average of 1.8 mln tons of western naphtha a month for first quarter arrival versus 1.4 mln for April arrival. YNCC was one of the first buyers from South Korea to purchase second-half May naphtha. It bought 50,000 to 75,000 tons of the fuel at a premium of about US$2/ton to Japan quotes on a cost-and-freight (C&F) basis. South Korea is Asia's biggest naphtha importer. As per Reuters, the purchase came a day after Japan's Idemitsu, Taiwan's Formosa and Malaysia-based Titan had snapped up a total of more than 140,000 tons of naphtha for May delivery. For now, most crackers are heavily dependent on naphtha as alternative liquefied petroleum gas (LPG) prices are not any more economical than naphtha. While the United States is set to increase its LPG exports to Asia, supply shortages in the East are expected to reach new highs due to growing demand. India's Bharat Petroleum Corp Ltd (BPCL) has delayed awarding a tender to sell 35,000 tons of naphtha for April 28-30 loading from Mumbai from Wednesday to late Thursday, traders said. The reasons behind the delay were not clear.