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Tight supply, steady petchems demand keeps northwest Europe naphtha firm in June

July 10/2020

MOSCOW (MRC) -- The naphtha market in northwest Europe (NWE) maintained its upward thrust in June as reduced flows from Russia tightened availability amid buoyant petrochemical buying interest, which has offset weak demand from the gasoline blending sector, said Chemweek.

The average OPIS CIF NWE naphtha spot price in June rocketed up to USD341.70/metric ton in June, a gain of USD94/metric ton or 24.6% from May, while the Brent futures marker average of USD40.56/barrel (bbl) in June was up USD3.73/bbl or 9.2% from the previous month.

The naphtha crack flipped into positive territory in June for the first time in 18 months, reaching a high of USD1.10/bbl after starting the month at minus USD4.23/bbl, according to OPIS data. The June/July backwardation widened as the month progressed, ending at USD12.50/metric ton tipping from a contango structure in the first half of June of around minus 43 cents/metric ton.

Low refinery runs in Europe and fewer exports from Russia were attributed to tighter supply of naphtha, with reduced imports from the US seen as a further contributory factor. The main bullish signal for naphtha which hasnt really changed is supply, says one source. "Supply, supply, supply."

Naphtha loadings in the European region, including northwest Europe, the Russian Baltic and Black Sea, other Baltic, Mediterranean, and North Africa, fell to 2.23 million metric tons in June from 3.12 million metric tons in May, according to data from IHS Markits Market Intelligence Network (MINT) vessel tracking service.

Analysis of Russian naphtha liftings from Baltic and Black Sea ports indicated that the drop was sharply more pronounced for the Black Sea. Naphtha exports from Russian Black Sea ports plunged 821,542 metric tons compared to the prior month to 355,000 metric tons in June, the equivalent of 10 long-range, 80,000-metric ton, cargoes. The reduction came namely as Tuapse, a key supply hub for arbitrage cargoes to Asia, shipped just 165,000 metric tons in June, a decline of 726,000 metric tons from May.

Russian Baltic naphtha exports decreased by 33,404 metric tons from Mays total to 768,100 metric tons in June. The Baltic terminal Ust Luga, which accounted for 59.9% of Russias total naphtha exports in May and is the main source of NWE naphtha imports, registered a 21,267-metric ton decline to 673,100 metric tons in June.

The naphtha market in Asia, despite the return of its traditional refiner sources in the Arabian Gulf and India over the month from turnarounds, continued to exert a strong pull on cargoes from Europe with arbitrage volumes to Asia little changed. Naphtha volumes in Europe loading for ports in Asia were tracked at 922,800 metric tons in June, compared with 969,000 metric tons for May.

Naphtha demand in Europe held firm in June with crucial support coming from petrochemicals as gasoline/blending demand was very weak to non-existent. Steam crackers have not reduced run rates as much as refineries owing to the need for plastic hygienic products amid the COVID-19 pandemic, according to IHS Markit analysts, and a strengthening ethylene and propylene market in Europe have both helped keep cracker margins sturdy.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 595,170 tonnes in the first five month of 2020, up by 10% year on year. Deliveries of all ethylene polymers, except for linear low density polyethylene (LLDPE), rose partially because of an increase in capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market was 457,930 tonnes in January-May 2020 (calculated by the formula production minus export plus import). Deliveris of exclusively PP random copolymer increased.


mrcplast.com
Author:Anna Larionova
Tags:PP, PE, ethylene, propylene.
Category:General News
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