Naphtha crack jumps 25% from a 5-1/2 month low

12-Feb-16

Asia's naphtha crack leapt 25% to a two-session high of US$64.3/ton on Thursday, almost entirely reversing the previous session's 24% plunge to a 5-1/2 month low. South Korea's LG Chem sought naphtha for H2-March delivery with buying ideas at a discount of US$4 vs limited offers at a discount of US$1-2/ton to Japan quotes on a cost-and-freight (C&F) basis, traders said in Reuters. This, however, could not be confirmed as LG Chem does not comment on its deals and the final results were not immediately known. Deals done in South Korea last week for cargoes delivering in H2-March were at discounts of US$4 and US$5. Traders expected prices this week to be stronger as heavy purchases last week had help to ease the supply glut. Additionally, the lack of affordable alternative liquefied petroleum gas (LPG) feedstock would mean petrochemical makers have to rely mostly on naphtha as their source of raw material. Petrochemical makers can replace 5 to 15% of naphtha with LPG if prices of the latter are at least US$50/ton lower than the former. Currently, LPG prices are higher than naphtha. "There were many purchase tenders before the Chinese New Year. Most unsold cargoes have already found buyers," a Singapore-based trader said, explaining the current stronger market.