Naphtha supply tightens in amid February export cuts by India

11-Feb-15

Indian refiners will export less naphtha in February to cater to growing domestic demand, further tightening Asia’s supply of the petrochemical feedstock, as per traders in ICIS. India is expected to export 550,000 tons of naphtha in February, down from 600,000 tons shipped out in January. This coincided with weaker inflows of deep-sea supply amid rising demand in China. Some of India’s domestically produced naphtha is being retained to meet the demand of Haldia Petrochemicals’ 670,000 tpa ethylene capacity, according to ICIS. Asia is expected to see a reduction of at least 150,000 tonnes of deep-sea supply from the US in the month of March, partly due to an ongoing refinery strike. The region receives at least 1.5 mln tons of arbitrage naphtha from Europe, Russia and the US each month, as per traders. Around 800,000 tonnes of deep-sea cargoes will flow into Asia in H1-March. The total arbitrage volumes for the whole of next month, however, is expected to be lower than February’s 1.9 mln tons, amid tighter naphtha availability in Europe. Expectations of tighter supply sparked off higher premiums in latest spot naphtha tenders and trades, traders said. Demand continues to firm in Asia, led by active buying from China. Higher cracker run rates in Asia amid rising ethylene prices also bode well for naphtha consumption, they said. From March to May, demand for naphtha is likely dwindle as the turnaround season for regional crackers kicks in, traders said.