Naphtha dips to 5 year lows in Asia

04-Nov-08

Naphtha has dipped below US$250/MT, currently standing at 5 year lows after witnessing a steep plunge from all time highs of US$1200 in July. Interestingly, oil prices have about halved since July, while naphtha prices have fallen by almost 70%. At current levels, naphtha, a by-product of crude oil, is trading well below the cost of crude - a very bizarre occurrence. Petrochemical prices have sunk to new lows, as recession seems to be imminent is the US economy and manufacturing has nose dived all across. There is a steep decline in demand from USA and Europe that is affecting China, and as per head of petrochemicals at Platts, this is not yet the bottom of the market. The plunge in feedstock and polymer prices far exceeds the 50% drop seen in oil prices, an indication of very feeble demand in Asia, particularly China. Key processors in China supply finished products mainly to export markets. As global economic slowdown gathers pace, demand (particularly from USA) continues to slacken, affecting buying in China. A 200 dollar drop has been witnessed in PVC prices in one month alone. Deals for PP were heard concluded below the 800 dollar mark, while feedstock propylene has dipped lower than US$400/MT FOB Korea. Styrene Monomer prices have plummeted below US$550/MT FOB Korea. Butadiene prices have fallen to around US$1200/MT, CFR China offers for ABS have been heard at US$1600/MT. Price of benzene has fallen last week below the cost of naphtha for the first time since the 1980s, as per Platts.