Asia's naphtha cracks recovered to a two-session high of $60.78 a tonne on Thursday after the value dropped to its lowest in nearly seven months in the previous session. Traders said fundamentals remained weak because there were ample supplies of open-specification naphtha, though heavier grades were more limited, which could be key factors behind the comparatively firm prices for the latter.
South Korea's Hanwha Total and SK Energy have bought heavier-grade naphtha for lifting in the second half of March at premiums of $6 to $7 a tonne to Japan quotes cost and freight (C&F). This was higher than the $4 a tonne premium SK Energy and Hanwha Total had paid in late January for cargoes delivering in the first half of March.
"There is plenty of open-specification naphtha but limited heavy full-range grade," one Singapore-based trader said, adding that the stronger premiums for heavy naphtha was not an indication that the overall market was improving. Open-specification grades are mostly cracked into petrochemicals such as ethylene and propylene, the building blocks for plastics.
SK Energy and Hanwha Total are likely to use the heavy full-range naphtha as feedstock for condensate splitters. Formosa, Asia's top naphtha importer, has an outstanding spot tender due February 9 to buy open-specification naphtha for delivery in the second half of March.
On January 31 it paid a discount of about $2 for up to 120,000 tonnes scheduled for delivery in the first half of March. That was the first discount it had garnered from sellers since September. India's Mangalore Refinery & Petrochemicals offered 35,000 tonnes of naphtha for loading March 13-15 from New Mangalore through a tender closing February 13.
GS Caltex, South Korea's second-biggest refiner, plans to invest about 2 trillion won ($1.84 billion) in a new olefins plant expected to start commercial operation in 2022. The plant will use naphtha and liquefied petroleum gas as its main feedstock to produce petrochemicals including 700,000 tonnes a year of ethylene.
Asia's gasoline crack was near a two-week low of $8.32 a barrel as supplies built. Singapore's onshore light distillates stocks, which comprise mostly gasoline and blending components for the fuel, rose by 9.2 percent, or nearly 1.2 million barrels, to reach a four-week high of about 14 million barrels, official data showed.
The higher stocks in Singapore mirrored the trend in the United States, where gasoline stocks rose by 3.4 million barrels last week, data from the Energy Information Administration (EIA) showed on Wednesday.