Naphtha spot price in South Korea turns positive as supply glut ends

21-Sep-15

South Korea's naphtha spot prices on a cost-and-freight (C&F) basis flipped into premiums on Thursday after persisting at discount levels since early July, as per traders in Reuters. Prices turned positive at a faster-than-expected pace as not only has the supply glut ended, but buyers were also rushing in to secure cargoes for H1-November. Lotte Chemical bought at least one cargo for H1-November delivery on Friday at a premium of 50 cents/ton to Japan quotes on a C&F basis. This came just a day after LG Chem and SK Energy bought cargoes for the same delivery period. LG Chem paid a premium of 50 cents to US$1 for about 75,000 tons of naphtha for H1- November delivery to Yeosu and Daesan but the grade was not known. As for SK Energy, traders estimated the price for the refiner to be in the range of US$2-3/ton premium as the grade bought was heavy full-range naphtha, where supplies are not as readily available compared to open-spec and full-range grades. "The market changed tide faster than was expected as buyers see a more bullish market because of lower supplies. But the naphtha crackers in South Korea are running at maximum mode although there's a turnaround coming up in October," said a trader. Sellers had previously expected the market to improve after Lotte Chemical completes its cracker turnaround on Nov. 14. The 1 mln tpa cracker is scheduled to shut on Oct. 16, and that would wipe out a substantial amount of demand during the shutdown time. Early this week, prices in South Korea were still at a discount after YNCC bought a H2-October cargo at a discount of US$3. After months of being bombarded by high volumes of naphtha coming in from the West, including Europe and the Mediterranean, Asia will now receive about 1.5 mln tons of naphtha in October, or 11% lower than the monthly average for volumes that arrived in the first eight months. Saudi Aramco may also have fewer cargoes for Asian buyers as it plans to shut its 400,000 bpd Rabigh refinery for a 50 day maintenance starting on Oct. 4.