Naphtha crack in Asia falls from a near 6-1/2 month high

30-Mar-15

Asia's naphtha crack fell from a near 6-1/2 month high on Friday to a 3 session low of US$124.3/ton, weighed down by the possibility that buyers may soon be able to use alternative liquefied petroleum gas (LPG) feedstock, as per Reuters. LPG can replace up to about 15% of naphtha feedstock in some of the Asian petrochemical units used to produce ethylene and propylene, the building blocks for plastics. "LPG is marginally workable now as a substitute for naphtha but maybe by next week, there could be a wider gap between naphtha and LPG," said a trader who tracks LPG. Naphtha prices have been rising recently following squeezed supplies caused by shipment delays of European cargoes to Asia and Qatar having cancelled to sell 75,000 tons of naphtha for late April loading from Ras Laffan. "Naphtha's premiums have been strong recently. There are buyers still looking for naphtha for first-half May delivery and even some small volumes for second-half April delivery," said a North Asian naphtha trader. "But the offers are so high. Some of the buyers are now contemplating on buying LPG instead," said a North Asian naphtha trader. As a rule of thumb, LPG prices should be at least $50 cheaper than naphtha. A trader said one buyer may have succeeded in buying a H1-May LPG cargo, possibly the first of such spot deals in South Korea this year, but this could not be independently confirmed.