Asia’s naphtha prices are likely to stay robust even after the Lunar New Year having soared to an almost 10-month peak, on the back of tightening supply in the region and strong petrochemical demand, as per ICIS.
Open-spec H2-March contract retreated at US$1034-1037/ton (€776-778/ton) CFR Japan on Friday morning because of overnight losses in US crude futures. Naphtha values settled at US$1035.50-1037.50/ton CFR Japan on Thursday – the highest levels since 13 April 2012 when naphtha prices closed at US$1067.50-1069.50/ton CFR Japan, according to ICIS data. Amid tight spot supply, it is difficult to find cargoes from the west from H2-March to early April. Naphtha supply is tight in Asia because of limited flows from northwest Europe and the Mediterranean coupled with low exports from Indian refiners and plant maintenance in the Middle East, traders said. On the other hand, demand is bullish and will remain strong following the Lunar New Year festivities on 9-15 February. Higher cracker run rates in Japan have bolstered the usage of naphtha feedstock, traders said. Japanese crackers are running about 90% and a weaker yen also makes petrochemical exports more competitive. China imported 357,251 tons of naphtha in December last year, up by 60% from December 2011, customs data showed. The country’s naphtha imports, however, fell by 22% from November 2012. China did not export any naphtha in December 2012 because of strong domestic demand. The spot premiums fetched in the deals were much higher in the week, given such strong fundamentals.
Higher ethylene prices over the past four weeks also underpinned the strong cracker runs in Japan. Asia’s ethylene prices rose to US$1380-1410/ton CFR NE (northeast) Asia on 7 February, up from US$1340-1360/ton CFR NE Asia four weeks ago, ICIS data showed. Meanwhile, the naphtha market drew support from bullish Chinese demand, traders said.