Asia naphtha moves from a contango to parity; demand revs up

SINGAPORE (ICIS)–Asia naphtha markets are gathering ground with spot demand for October revving up, keeping sentiment on the boil.

Open-specification naphtha prices averaged at $416.00/tonne CFR (cost & freight) Japan for first-half October delivery, climbing $8.00/tonne from the session close on 24 August.

The intermonth spread for the first halves of October and November stood at parity, moving from a contango at $3.75/tonne a week earlier amid improved spot buying.

The market structure had flipped to a contango from a backwardation on 11 August when fundamentals weakened, partly resulting from cracker maintenance curtailing petrochemical demand, particularly for prompt-month cargoes.

Several end-users came forward to buy spot naphtha cargoes for first-half October arrival.

South Korea’s Yeochun NCC (YNCC) bought two naphtha cargoes of around 25,000 tonnes each at a discount of $3.00/tonne to spot CFR quotes, slated for first-half October delivery to Yeosu.

South Korea’s LG Chemical is also in the market seeking spot cargoes, while Lotte Chemical purchased a first-half October shipment at a low single-digit discount to spot CFR Japan quotes.

Taiwan Formosa Petrochemical (FPCC) is considering its spot requirements and might issue a buy-tender in the next few days for first-half October shipments.

FPCC is carrying out scheduled maintenance at its No 3 cracker for up to 50 days, which is expected to be completed in late-September.

The key importer bought 50,000 tonnes of second-half September naphtha at around parity to its pricing formula for delivery to Mailiao. FPCC skipped its tender for second-half August supplies ahead of the turnaround.

Improved buying appetite has seen naphtha’s crack spread, or its refining margin edging up to close at $73.05/tonne on 24 August, the highest level in almost a month at above $75/tonne on 28 July.

It is uncertain, however, whether the gasoline market recovery in Europe will be enough to support naphtha-blending demand amid lingering concerns of coronavirus infections globally, according to market sources.

At noon session in Asia, October ICE Brent crude oil futures stood at $45.23/bbl on mixed market sentiment as Tropical Storm Marco weakened sooner than expected.

Focus article by Melanie Wee