Naphtha prices drop on weaker crude, premiums spike to two month highs in Asia

11-Jul-12

Naphtha price in Asia extended losses to reach a 4 session low of US$816/ton on Tuesday on weaker Brent crude, but spot premiums in South Korea were at their highest in two months on firm demand, as per Reuters. Lower exports and stronger petrochemical margins were some of the key factors behind the improved spot naphtha feedstock demand. LG Chem has bought at least 25,000 tonnes of open-spec naphtha at premiums of about US$7.50/ton to Japan quotes on a cost-and-freight (C&F) basis, making this the highest premium paid in South Korea since May 9. The cargo is scheduled for H2-August arrival at Yeosu. India's overall naphtha exports are likely to fall by over 30% to 580,000 tons for the month as Reliance Industries has decided not to export spot naphtha in July for the first time in more than 18 months. Currently, petrochemical margins are good, mainly due to olefins supply shortage caused by Formosa’s recent outage. However, the region is expected to see increased olefins supply with the recent higher operating rates at some of the regional crackers.