Asia's naphtha crack slipped to $96.85 a tonne on Friday in reflection of possible ample supplies in first-half June as western barrels were still being fixed for Asia arrival. Traders' keen focus on supplies from the West including Europe and the Mediterranean has overshadowed the stream of steady demand and high cracker run rates in Asia driven by strong petrochemical margins.
Japan's Maruzen for instance was running its 525,000 tonnes per year cracker, which uses naphtha as feedstock to produce petrochemicals, at full capacity. A senior official of Maruzen said cracker maintenance (which leads to tighter petrochemical supplies) in South Korea has boosted petrochemical margins.
But he cautioned that once the maintenance season is over, petrochemical margins could ease as ethylene supplies would be restored. In Taiwan, CPC Corp was seeking full-range and heavy naphtha for June 1-20 delivery to Kaohsiung in a tender which closes o April 27, with offers to stay valid until April 28. This came shortly after Formosa Petrochemical was out to buy heavy naphtha. But results of the tender were not known.
"Up until last week, the naphtha market was still holding up. But premiums started to take a hit this week," said a North Asian trader in reference to spot deals done on a cost-and-freight basis on April 23. Itochu could have paid Mangalore Refinery and Petrochemicals Ltd (MRPL) about $32 to $33 a tonne premium to Middle East quotes on a free-on-board (FOB) basis for 55,000 tonnes of naphtha for mid-May loading from New Mangalore, traders said.
This however could not be directly confirmed as sellers and buyers do not usually comment on their deals. "Itochu could be short covering and needed the cargo," said a trader, adding that the price was above market expectations of a maximum of $30 a tonne. MRPL had previously sold two April cargoes at premiums of $33.70 and $28.50 a tonne to Middle East quotes on a FOB basis respectively.