Asia naphtha sees price uptrend as Formosa buying re-emerges

(ICIS) -- Asia’s naphtha prices are likely to stage an uptrend until late January, supported by strong spot buying from dominant importer Taiwan and trading companies which helped to mop up voluminous deep-sea inflows for next month, traders said on Friday.


The naphtha inter-month spread widened USD1/tonne (EUR0.77/tonne) to USD7.50/tonne in backwardation, while the prompt naphtha crack spread strengthened to near USD100/tonne against Brent crude futures.

"The market is heading for a hike and this will be the case until the Lunar New Year," said a trader.
The Lunar New Year takes place on 23-24 January 2012. "The trading companies have rushed to buy lots of spot cargoes for January. The huge arbitrage volume for January has already been absorbed into the market," the trader added.

Asia is expected to receive half a million tonnes of arbitrage European naphtha next month, and the fact that the cargoes were placed swiftly reflected strong regional demand, traders said.
Taiwan’s Formosa Petrochemical Corporation (FPCC) bought on Thursday 150,000 tonnes of spot naphtha for second-half January delivery, its first spot purchases since August and after lifting run rates at its three crackers to 85-86% from 80-85% previously.


The cargoes were transacted at a premium of USD3.00-3.50/tonne to Japan quotes CFR (cost and freight). FPCC ceased spot naphtha imports from August to mid-December because of cracker shutdown issues.

Demand from FPCC is expected to remain strong in the first half of next year, because the company has scheduled to shut its 700,000 tonne/year No 1 cracker at Mailiao for a 40-45 day turnaround in August 2012.


Meanwhile, the South Korean crackers paid higher naphtha premiums this week for spot transactions for second half of January delivery, traders said.


mrcplast.com